Kenya’s private sector sees slight contraction in March

Kenya’s private sector saw a slight contraction in March, attributed to cashflow issues at some businesses, according to Reuters citing a Thursday business survey.

The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dropped to 49.7 from February’s 51.3. Readings above 50 indicate growth, and below signify contraction.

February marked the first time since August that the index surpassed 50.

Stanbic Bank noted modest output contraction due to reduced new orders and cashflow problems. Though new orders declined fractionally, easing price pressures supported consumer spending.

Kenya’s shilling appreciated by 19 per cent against the dollar this year. Fuel prices also decreased in the latest regulator review ending April 14.

Christopher Legilisho, an economist at Stanbic Bank, attributed easing input, purchasing, and output price pressures to declining fuel prices and a stronger shilling against the dollar in March.

“Private sector activity softened in March, offsetting the expansion during February. Output, new orders and purchasing activity contracted due to fewer sales
and less readily available cash flow. Firms noted that, despite lower inflation, a stronger shilling against the USD in March, and increased marketing efforts, cost-of-living pressures are still subduing consumer demand.” Legilisho noted.