PMI declines to record low in February

 

  • PMI falls to record low to signal broadly stagnant business conditions
  • Output declines for first time since survey began in January 2014
  • Employment growth eases to marginal Pace

Latest survey data signalled broadly stagnant business conditions across Kenya’s private sector economy with the PMI posting its lowest reading since the inception of the series in January 2014. Weighing on the headline index was a fall in output albeit marginal while growth in new orders eased to the second-weakest in the series history. Employment meanwhile increased only fractionally, which contributed to a further rise in backlogs of work. Firms raised their input buying at a modest pace to cater for an increased volume of new orders. Output charges rose only slightly, to reflect efforts at some firms to stimulate demand despite a further increase in input costs.
 

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. At 50.1 in February, down from 52.0 in January, the seasonally adjusted PMI signalled broadly stagnant business conditions. Notably, the index reading was the lowest seen over 38 months of data collection.
 

Commenting on February’s survey findings, Jibran Qureishi, Regional Economist E.A at Stanbic Bank said: “As we pointed out in our previous report, the ongoing drought and decline in private sector credit access will inevitably lead to deterioration in business conditions within the Kenyan private sector. This month’s historic low reading is symptomatic of these risks that we are flagging. In addition, potentially higher input costs over the coming months could also hinder the private sectors progress. More importantly, the long rains season beginning in March will be pivotal for the agricultural sector, and in the event that the rains are inadequate, we may potentially see an entrenched slowdown within the business operating environment.”

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