Kenyan companies slowed down on production in January 2024, a Purchasing Manager’s Index (PMI) survey by Stanbic Bank has established.
Related to the slow down, according to the survey, is a finding that purchasing activity in the country dropped for the fifth month in a row and at an even faster pace than in December 2023.
As per the report, the seasonally adjusted Quantity of Purchases Index (volume of goods sold, produced or sold in a period) dropped in January, signaling a modest reduction in input purchases across the private sector.
Stanbic’s report stated that the slowdown in production was also attributed to a weak client demand and cash flow problem.
Commenting about the findings, Christopher Legilisho, an economist at Standard Bank, said the wholesale and retail sectors in Kenya were affected by a continued pressure from insufficient cash flow.
“Output volumes moved in lockstep with the new orders trend in January, as the decline in new orders also slowed to a fractional pace that was the softest for five months, “part of the report read.
“While many companies reported a drop in sales from reduced client spending and cash flow problems, higher sales and a positive impact from marketing were cited at other businesses.”
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And the situation is not expected to get any better, according to the outlook in the report, with just 10% of businesses predicting to increase output over the next year.
“Notably, just 10% of businesses predicted a rise in output over the next year, citing efforts to increase projects, add services, boost marketing and open branches.”
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At the same time, the number of jobs increased in January, a trend attributed to stabilization of demand conditions.
This was the first month where employment numbers went up since August 2023.
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However, the rise in employment rates was only marginal,with comments mainly linking the rise to the addition of temporary employees.
“Labour costs declined for the second month in a row in January, as shown by the seasonally adjusted index recording below the 50.0 neutral threshold.
“Although the rate of decrease was only marginal, it was the fastest seen in just under three years,” the report added.
