Private sector activity slowed in October after expanding a month earlier for the first time since March, as higher operating costs and rising prices led to lower consumer spending.
This is according to the latest Stanbic Bank Kenya Purchasing Managers’ Index that saw October register a reading of 50.2, down from a seven-month high of 51.7 recorded in September.
The latest Purchasing Managers’ Index survey shows, that Kenyan private sector businesses saw only a mild improvement in operating conditions in October, as ongoing concerns about the rising cost of living led to a softer expansion in new orders and a renewed drop in output.
The rising cost-of-living led to weaker customer spending, whilst higher expenses hit business activity in some cases.
This contributed to lower sales in the construction, services and wholesale & retail sectors. Agriculture and manufacturing were the only areas to record growth.
This saw Kenya Purchasing Managers’ Index fall to 50.2 in October from 51.7 in September, when renewed growth was indicated due to the end of the national election period.
Purchasing Managers’ Index readings above 50.0 signal growth in business activity, while those below that, point to a contraction.
Mulalo Madula, an Economist at Standard Bank says October’s PMI continued to signal an improvement in business conditions, albeit with a loss of momentum compared to September.
New orders, employment and purchasing growth recorded weaker expansions.
Input costs accelerated, underpinned by higher fuel prices, a weaker exchange rate, staff costs, and shortages of commodities such as timber and animal feed.
He warns that if price pressures persist and firms continue to pass on a higher share of rising input cost burdens to output charges, demand may weaken in the short to medium term, slowing the overall rate of improvement in Kenya’s business environment.
Despite this, employment numbers went up, with the rate of job creation quickening slightly from September.
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