Kenya’s private sector activity dipped to a nine month low in January due to a decline in output and new orders.
The two sub indices dropped by the largest margins since October 2017, according to a monthly survey.
The Stanbic Kenya Bank Purchasing Managers’ Index shows operations dropped to 49.7 in January from 53.5 In December.
Readings below 50.0 show a deterioration.
“Overall activity levels contracted solidly at the start of the year, as firms reported that a lack of money at households led to much softer demand pressure,” the report read.
Consequently, purchasing activity and employment growth slowed while rising input costs lead to a quicker increase in output prices.
Poor weather conditions also curbed output at many businesses as the rate of decline was the quickest in over two years.
While new orders increased in January, latest data indicated a much softer rate of growth than in December.
This was linked to weaker customer demand as a result of poor cash flow in the economy.
Analysts at Stanbic however said the slowdown was chiefly domestic, as firms selling to international markets saw one of the sharpest increases in new export orders on record.
"Despite the slow start to the year from the private sector, there are reasons to be optimistic for the year ahead," said Regional Economist E.A at Stanbic Bank, Jibran Qureishi.
He said the weakness in private sector activity in January seems largely due to the heavy rainfall from the end of 2019 which has constrained domestic demand.
On the contrary, heavy rains were experienced in the country since December saw renewed improvement in delivery times for businesses in January.
Firms also noted that suppliers worked quickly to restore supply chains.
Meanwhile, selling prices were raised for the second consecutive month, linked to another solid rise in total input costs.
Inflationary pressures mainly arose from higher prices for commodities, fuel and flowers, the survey said.
The 5.78 per cent inflation rate recorded in January by the Kenya National Bureau of Statistics was driven by a rise in prices of some food items such as onions, spinach and carrot.
“Business confidence for future output has soared given some of the recent reforms such as the repeal of the interest rate capping law and ongoing clearance of private sector arrears., said Jibran.
He said the the agricultural sector this expected to perform much better this year.
