The Purchasing Managers’ IndexTM (PMI®) survey data released by Stanbic Bank Kenya revealed a worrisome scenario for the Kenyan business environment, signaling a significant downturn in business conditions midway through the final quarter of the year.
The headline index experienced a drop to 45.8, down from October’s 46.2, marking the third consecutive month of contraction and representing one of the weakest performances in the index’s nearly decade-long history.
The report identified persistent inflationary pressures as a key driver behind this decline. Inflation remained at near-record levels, attributed to currency depreciation, increased taxes, and elevated fuel charges reported by companies across various sectors. While the uptick in input costs led to a notable rise in output charges, it was slightly less severe than the record-setting levels observed in October.
The repercussions of rapid inflation manifested in sustained contractions across multiple business aspects. New order volumes experienced a sharp decline, mirroring October’s downturn and ranking among the most severe on record. Survey respondents cited reduced customer spending due to elevated prices and cash flow challenges, resulting in a consequential reduction in output levels, particularly in the construction sector.
The adverse impact extended to employment, with staff numbers decreasing at one of the sharpest rates on record, reminiscent of the downturn experienced during the initial COVID-19 lockdown. Purchasing and employment also witnessed accelerated declines, although lower input purchases led to a slight improvement in delivery times.
Business expectations for the upcoming year were notably subdued, reaching a four-month low. Only 17% of companies expressed confidence in growth, with considerations tied to expansion plans and the launch of new products and services. The challenging economic conditions underscore the imperative for strategic resilience and adaptability among businesses as they navigate the complex landscape characterized by inflationary pressures and reduced consumer spending.
