Aerial view of a section of Westlands, Nairobi
View of a section of Westlands, Nairobi.

Business conditions for Kenya’s private sector marginally improved in December 2020, according to Stanbic Bank’s Purchasing Managers’ Index survey.

The headline figure rose from 51.3 in November to 51.4 in December, signaling a modest improvement in business conditions.

Output, however, rose at the slowest rate in six months, with business confidence also falling to a new record low. The growth was supported by improved employment figures.

According to Kuria Kamau, Fixed Income and Currency Strategist at Stanbic, the numbers are an indicator of a slow-down in the pace of economic recovery from the shocks of the Covid-19 pandemic.

He argued that the slowdown was inevitable after the surge in business activity witnessed in October 2020 after various restrictions were scaled back.

View of a section of Nairobi, Kenya's capital city. Kenya's GDP is forecasted to grow by 6.9 per cent in 2021.
View of a section of Nairobi, Kenya’s capital city.

The PMI survey released for October 2020 indicated that firms were hiring at the highest rate in 11 months.

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A second wave of infections, however, contributed to the extension of restrictions in Kenya including the curfew, dimming business prospects for 2021.

Firms also suffered thanks to disrupted access to inputs and global shortages.

“Rising input costs, partly caused by disruptions in supply chains as well as some input shortages, have also resulted in a slowdown in the growth in output. This slowdown was inevitable following the significant improvements in economic activity witnessed in October after the relaxation of public health restrictions.

“Furthermore, a resurgence in COVID-19 cases, as well as the re-introduction of lockdowns in some international markets, has lowered expectations for the post-pandemic recovery in 2021,” Kamau stated.

New order growth also recorded a slight increase compared to November, but remained much lower than October’s record highs.

Improved cash flow on higher customer orders and eased restrictions were cited as contributors to the growth in total output.

Average prices charged fell for the second consecutive month in December. This was despite some firms passing on higher costs to consumers.

Other firms, however, looked to woo customers with discounts and other similar offerings.

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