Kenya’s private sector has experienced a severe downturn in July 2024, marked by a notable drop in the Stanbic Bank Kenya Purchasing Managers’ Index (PMI®), which plummeted to 43.1 from 47.2 in June. This decline signals a significant deterioration in business conditions and highlights the impact of ongoing political unrest and protests.
The month of July saw a dramatic reduction in both output and new orders, largely due to disruptions caused by protests and political instability. Many businesses faced difficulties in operating as protests blocked access and limited customer engagement. Consequently, output and new orders fell at the most rapid pace since April 2021.
The protests not only curtailed business activity but also led to longer supplier delivery times and increased backlogs of work. For the first time in ten months, suppliers’ delivery times lengthened, and backlogs of work grew to their highest levels since March 2023.
Despite these challenges, inflation rates remained relatively stable compared to the previous year. Input costs increased for the second consecutive month, reflecting persistent high living costs and taxation pressures. However, inflation was notably subdued compared to the spikes seen throughout 2023.
Businesses reduced their purchasing activity and inventory levels, adjusting to the sharp decline in new orders. Nonetheless, employment continued to grow, albeit at a slower pace. Job creation remained positive for the seventh month in a row, indicating a cautious optimism among some firms despite the overall negative outlook.
Business confidence also took a hit, with expectations for future output dropping to their second-lowest level on record. Only a small fraction of firms expressed optimism, largely attributing their positive outlook to planned expansions such as new branch openings.
Christopher Legilisho, Economist at Standard Bank, noted: “The PMI for July paints a clear picture of the adverse effects of ongoing protests and political instability on the Kenyan private sector. Business operations have been severely disrupted, leading to declines in output and new orders. While inflationary pressures have moderated, the overall business climate remains fragile. Companies are grappling with increased costs and reduced demand, and while employment levels have risen, the pace of job creation is slowing.”
