Connect with us

Politics

Elections dampen business, survey reveals

The seasonally adjusted Stanbic Bank Purchasing Manager’s Index fell to a survey-record low of 42.0 last month from 48.1 in July

Published

on

Jibran Qureishi, Regional Economist EA at Stanbic Bank

The health of Kenya’s private sector sharply deteriorated during August marking the worst performance in Stanbic Bank Purchasing Manager’s Index (PMI) short survey history mainly as a result of election jitters, latest  data indicates.

The fall was driven by sharp falls in output, new orders and stocks of purchases. In response to lower output requirements, firms reduced their payroll numbers. On the price front, divergent trends were observed as overall input costs rose, while firms continued to reduce output charges, Stanbic Bank says.

The seasonally adjusted PMI fell to a survey-record low of 42.0 in August from 48.1 in July. This was consistent with a sharp deterioration in business conditions across Kenya’s private sector. The headline PMI index has now recorded below the 50.0 no-change mark for five of the past six months

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

Commenting on the survey findings, Jibran Qureishi, Regional Economist EA at Stanbic Bank said“The Stanbic Bank PMI fell to another survey record low of 42.0 in August and has now been in contractionary territory, for four consecutive months. Notably, the anxiety around a tense general election in August was one of the major factors that weighed down the private sector; however this angst is likely to extend over the coming months due to the recent decision by the Supreme Court to nullify the presidential election results.”

“The decision by the court is indeed a reflection of Kenya’s strengthening institutions and will certainly appease the foreign investor community. That said, as we have been pointing out previously, the promise of the private sector remains under risk should the ease of access to credit remain a challenge. Yet, a stronger EUR currency will probably be quite beneficial for horticultural earnings while tourist arrivals are probably likely to increase further as political temperatures eventually cool down after the re-run of the presidential elections,”  Qureishi added.

ALSO SEE: Safaricom, Equity played big role in NSE crash

The main findings of the August survey were as follows:

The overall downturn was driven by a fall in business activity. Output fell for the fourth month in succession. Moreover, the rate of contraction was the sharpest recorded since the inception of the survey in January 2014. Low money circulation and weak demand conditions were the key reasons cited by panellists behind a fall in output.

New orders fell for the first time in the survey’s history. Also, the rate of contraction was sharp overall. Firms attributed a decline in domestic demand to a lower customer turnout due to the political climate and weaker purchasing power among clients. New export orders fell for the first time in over three years as international demand for Kenyan goods and services was reduced.

Employment in the Kenyan private sector fell during August, the first decline in the survey history. The rate of job shedding was marginal, however. A number of monitored companies commented on weak demand and staff voluntarily leaving for better job opportunities.

Purchasing activity in the Kenyan private sector decreased for the second month in succession during August. The rate of contraction was the fastest recorded in the survey’s history. Subsequently, inventories held by private sector firms contracted during August.

On the price front, divergent trends were observed across the Kenyan private sector. Firms continued to offer discounts despite greater cost pressures. The rate of decline in output charges was modest, but the fastest observed in the survey’s history. The rise in overall input costs reflected higher purchasing and staff costs. The rate of inflation eased to the slowest since June 2016 and was weaker than the long-run average, however.

Nokia 8 - Share Both sides of the story.

Business Today is the leading independent online business website in Kenya. Started in 2012 by a veteran business journalist, it has a huge following both in Kenya and abroad. It covers various business and related issues. Email editor at: [email protected]

Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

News Updates

Education9 hours ago

Oxford launches guidebook for new curriculum

Oxford University Press (OUP) East Africa has, in partnership with teacher trainers, launched a free resource book in preparation for competency-based...

NEWS1 day ago

5 simple tricks Gordon Ogada used to win Sh230m mega jackpot

Gordon Paul Ogada, the guy from Kibera who won the SportPesa Mega Jackpot worth Ksh230,742,881 two weeks ago, is has...

Economy1 day ago

Drivers to pay Sh5,000 for refresher course

NTSA will also subject the drivers to medical tests on conditions that my affect their daily duties in the road

Health1 day ago

Govt partners with Johnson & Johnson on cancer control

The National Cancer Control Strategy 2017-2022 is geared at reducing cancer incidences, morbidity and mortality in Kenya

Disruptors2 days ago

Six-year-old boy creates high-tech computer game

EthanMan app is available for downloads on android play store for kids to read books and play games

NEWS2 days ago

Miguna makes fresh demand on passport

Judge Kimaru said the removal of Miguna Miguna from Kenya on February 6th was illegal and had no merit in...

Economy2 days ago

Citizens to get Sh30,000 bonus as economy grows

Singapore expects an overall budget surplus equivalent to 2.1 percent of its GDP

NEWS2 days ago

Gold worth Sh100 million found at JKIA

The gold is alleged to have been in the custody of a 46-year-old Tanzanian man

NEWS3 days ago

Water crisis hits major towns as rivers dry up

Athi Water Services Board, which manages water resources in various urban areas, notes 75% of Nairobi residents do not get...

Health3 days ago

Ebola scare after a student dies in Keiyo South

County executive says they have already communicated with the ministry of Health headquarters and a sample sent to the Kenya...

Advertisement



Trending