Nairobi — Kenya's private sector activity continued to deteriorate in March as business orders decreased for the second month running amid rising prices and cash flow problems, the latest PMI survey data shows.
During the month, inflationary pressures remained high, with around 30 per cent of surveyed businesses reporting an uptick in purchase prices linked to problems accessing US dollars and a worsening of exchange rates.
The latest increase in costs sent output price inflation to a five-month high, while related mentions of imported goods shortages led firms to seek safety stockpiles.
Even so, the decline in activity in March lessened somewhat from the initial downturn in February as businesses signalled renewed uplifts in employment and purchasing.
This saw the headline figure derived from the Stanbic Purchasing Managers' Index (PMI) improve to 49.2 from a six-month low of 46.6 in February.
The softer decline in business conditions reflected weaker falls in both output and new orders during March.
While many respondents continued to see demand fall due to high prices and a lack of money in circulation, others saw a recovery in customer orders, particularly from abroad.
"Although the pace of deterioration has slowed, Kenya saw business conditions continue to decline in March, as the PMI remains just below 50. Both output and new orders fell in March, particularly in wholesale and retail trade, due to lower demand, especially as price pressures have accelerated," said Mulalo Madula, Economist at Standard Bank.
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Sector data signalled that the latest contractions in output and sales were centred on wholesale & retail companies.
By contrast, manufacturing, agriculture, construction and services recorded expansions in both metrics.
At the same time, the data signalled renewed rises in employment and purchasing in March, although growth in both cases was only mild.
"The rise in purchasing reflected some efforts to build inventories of inputs, as firms reported that difficulties accessing US dollars had led to a shortage of commodities and longer delivery times," the survey noted.
Weakness in the Kenyan shilling against the US dollar meanwhile drove another marked increase in purchasing costs.
Around 30 per cent of firms saw purchase prices rise since February, with increased taxes and fuel prices also cited.
Overall cost inflation remained among the highest seen since the survey began in January 2014, leading firms to raise their output prices at the quickest rate in five months.
Finally, while the outlook for future business activity dropped to a three-month low in March, it remained strong and above the level seen throughout much of 2022.
Firms often commented on plans to open new branches and increase capacity over the coming year, amid hopes that demand will begin to recover.
