Kenya’s business conditions remained gloomy for a fourth consecutive month, owing to high price pressures that have reduced demand for commodities. According to the latest Stanbic Bank survey, the country’s Purchasing Manager’s Index (PMI) registered 49.4 in May 2023, though, it was an improvement from the 47.2 registered in April 2023.
A PMI reading below 50 shows worsening in business conditions, while a reading above 50 indicates an improvement in business conditions from the previous month.
Read more: Kenya’s Business Environment Deteriorates On The Back Of High Inflation
The rise in business costs during the month of May was the sharpest since the series began in 2014. The record rise in input prices of commodities across the private sector was mainly as a result of rising fuel prices in the country and high import costs.
The high import costs are mainly driven by the continued depreciation of the Kenya Shilling against the US dollar. The Kenya shilling has been under pressure due to growing demand from importers, particularly in the oil and energy sectors. Year to date, the shilling has depreciated by about 13% to trade at 138.87 against the US dollar, compared to the 9.0% depreciation recorded in 2022.
The survey also showed that almost a third of businesses reported a drop-in sale as a result of the high cost of living, which has reduced consumer purchasing power. However, there was a slight improvement in business expectations for the upcoming months, as only 10% of respondents had a positive forecast for output amid inflation concerns.
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