Private Sector Activity in Kenya Contracts in June, as Indicated by PMI

Mouad Boudina
Mouad Boudina
3 Min Read
Private sector

According to a recent survey released on Wednesday, the private sector in Kenya experienced a decline in activity during June. This downturn can be attributed to sluggish business performance in key sectors such as services, wholesale, and retail. The prevailing economic conditions characterized by high inflation and diminished consumer purchasing power have further contributed to the challenging business landscape.

In June, the Purchasing Managers’ Index (PMI) for Stanbic Bank Kenya registered a decline, dropping to 47.8 compared to the previous month’s reading of 49.4. The PMI is a significant indicator, with readings above 50 indicating growth. However, for the fifth consecutive month, the PMI has remained below the 50 mark, indicating a contraction in business activity. This sustained trend highlights the ongoing challenges faced by the private sector in Kenya.

Stanbic Bank Kenya stated that companies operating in the country have encountered challenging trading conditions, primarily attributed to the elevated inflation rates and limited spending capacity among clients. These factors have significantly influenced the business environment, making it more arduous for companies to thrive and maintain favorable trading conditions.

Analysis of sector-specific data has revealed that the services sector, along with the wholesale and retail sectors, emerged as prominent areas of weakness. These sectors have experienced notable declines, contributing to the overall downturn observed in the private sector. The findings emphasize the need for attention and potential measures to address the specific challenges faced by the services, wholesale, and retail industries to stimulate growth and restore stability within these sectors.

Since late 2021, the Kenyan shilling has consistently experienced a series of record lows, and its value against the US dollar has depreciated by 12% since the beginning of this year. This downward trend highlights the ongoing challenges and volatility faced by the currency. The decline in the shilling’s value against the dollar has implications for various sectors of the economy, including trade, investment, and overall economic stability. Measures to address this situation and restore confidence in the currency may be necessary to mitigate the impact on the country’s economy.

According to Mulalo Madula, an economist at Stanbic Bank, the new export business has sustained its expansionary trend for the fourth consecutive month, primarily attributed to the depreciation of the Kenyan shilling. The weakened value of the currency has provided a favorable environment for export-oriented industries, allowing them to capitalize on improved competitiveness in foreign markets. This positive development in the export business underscores the potential benefits that can arise from the currency’s depreciation, presenting opportunities for economic growth and diversification.

Mouad Boudina

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