Kenya’s Private Sector Activity Declines in June Amidst Inflation and Weak Consumer Spending
According to a survey conducted on Wednesday, Kenya’s private sector activity experienced a decline in June, primarily due to a slowdown in the services, wholesale, and retail sectors. These sectors have been affected by high inflation and a lack of purchasing power among consumers.
The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dropped to 47.8 in June from 49.4 the previous month. A PMI reading above 50 indicates growth, while a reading below 50 signifies a contraction in activity. The PMI has remained below 50 for the fifth consecutive month, indicating a sustained contraction.
Stanbic Bank Kenya stated that companies reported challenging trading conditions influenced by high inflation and reduced spending power among clients. The services sector and the wholesale and retail sectors were identified as key sources of weakness.
Inflation in Kenya eased to 7.9% year-on-year in June, compared to 8.0% in the previous month, according to data from the statistics office. Additionally, the Kenyan shilling has experienced repeated record lows since late 2021 and has depreciated by 12% against the dollar this year.
However, there was a positive aspect highlighted by the survey. The weaker shilling provided relief for exporters, as new export business has been expanding for the fourth consecutive month, thanks to the favorable exchange rate. Mulalo Madula, an economist at Stanbic Bank, emphasized this positive trend.