Kenya: Economic activity rises marginally in July

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Kenya’s economic activity increased marginally in July from the previous month, a new survey has revealed.

The survey also found that domestic demand improved by the second slowest pace since the lifting of public health restrictions after the first wave of pandemic, with some firms reporting a drop in customer numbers.

The survey was commissioned by and compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies in the country.

It also reveals that growth momentum in the private sector slowed again at the start of the third quarter of the year, as surveyed businesses reported weaker expansions in output, new orders, employment and purchasing.

At the same time, cost inflationary pressures rose to a 16-month high as tax changes resulted in a sharp uptick in purchase prices.

This led to a decline of the headline Purchasing Manager’ Index for a second straight month from 51.0 in June to 50.6 in July, to indicate only a marginal improvement in operating conditions across Kenya’s private sector.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.

Kenya’s business conditions deteriorate for first time since 2017

Barring the sharp downturn in April, the rate of growth was the joint-weakest since conditions began to improve after the first wave of the pandemic.

Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank said firms in agriculture, construction and services witnessed an increase in demand and output while those in manufacturing and trade saw declines.

“To meet this marginal increase in demand, firms also increased their output slightly as evidenced by slight increases in staffing levels and the quantity of purchases,” he said.

“Both input and output price inflation accelerated due to an increase in import taxes, fuel costs and shortages in some raw materials. The 12 month outlook by firms rose to its highest level in 5 months but remains below its long term average,” he added.

The economy

Lenyan businesses saw an increase in output during July as market conditions recovered further from the reintroduction of lockdown measures in April/ Lamu Port

According to the report, Kenyan businesses saw an increase in output during July as market conditions recovered further from the reintroduction of lockdown measures in April.

However, the expansion was only marginal and slower than that seen in June.

While 27 percent of panelists saw a rise in output, around 26 percent reported a decrease.

Sector data also presented a mixed performance, as agriculture, construction and services recorded growth, but manufacturing and wholesale and retail registered downturns.

In terms of new orders, the seasonally adjusted new orders index pointed to a third successive rise in sales at Kenyan firms during July.

The survey also observed that the latest upturn was the weakest seen since new orders began to recover from the first wave of the pandemic, barring the sharp decline in April.

“Higher demand was generally linked to improved cash flow and increased marketing activity, whereas other firms commented on a drop in customer numbers,” the report said.

The private sector of the East African nation also noted a continued slowdown in new export orders at the start of the third quarter of the year.

According to the survey, the latest expansion was the third in as many months, and moderate overall.

The IHS Markit survey also noted that growth in new export orders continued to soften at the start of the third quarter of the year.

According to the survey, the latest expansion was the third in as many months, and moderate overall.
Africa’s Economic Prospects Post-COVID-19

Jobs

The report noted that rising demand levels encouraged businesses to increase their staffing levels in July.

During the month, there was an increase in backlogs of work across the Kenyan private sector, which panelists said was attributable to increased orders from clients.

“Several firms reported taking on more temporary staff in order to complete new orders. The rate of job creation was marginal, however, and the weakest for three months,” the report said.

At the sector level, job numbers rose across manufacturing, construction, agriculture and wholesale & retail, but fell in services.

Wanjiku Njuguna is a Kenyan-based business reporter with experience of more than eight years.

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