MONTHLY REPORT

Private sector activities up in June as world ease Covid-19 restrictions

Firms saw the first upturn in new export orders since February, as trade with Europe strengthened.

In Summary
  • The Monthly Stanbic Bank Kenya Purchasing Managers’ Index (PMI) stood at 46.6 in June, rebounding from May’s 36.7 but staying below the 50 mark separating expansion from contraction.
  • Both output and new orders fell at slower rates in June, as the reduction in curfew hours helped many businesses to increase operating hours and reopen premises.
Stanbic Bank’s regional economist Jibran Qureishi./FILE
Stanbic Bank’s regional economist Jibran Qureishi./FILE

The Kenyan private sector activities registered improved growth in June as the country slowly eased Covid-19 restrictions.

Even so, output and new orders deteriorated further.

The Monthly Stanbic Bank Kenya Purchasing Managers’ Index (PMI) stood at 46.6 in June, rebounding from May’s 36.7 but staying below the 50 mark separating expansion from contraction.

“A resumption in cargo flights in addition to the gradual re-opening of economies around the world, is underpinning external demand,” said Jibran Qureishi, the head of research for Africa at Stanbic Bank.

Employment numbers meanwhile fell at the softest pace in three months, as purchasing activity also dropped at a much weaker rate.

Firms saw the first upturn in new export orders since February, as trade with Europe strengthened.

At the same time, overall cost pressures fell for a second month running due to further salary cuts. This continued the run of deterioration that began in January and accelerated due to COVID-19, but marked the weakest contraction in four months.

Both output and new orders fell at slower rates in June, as the reduction in curfew hours helped many businesses to increase operating hours and reopen premises.

Relaxed measures in Europe meanwhile led to a slight improvement in export demand that was the first since February.

However, firms still saw a drop in customer demand overall due to a reluctance to travel.

 

This softening led to weaker declines in employment and input purchases at the end of the second quarter.

Job numbers dropped at the softest pace since March, albeit one that was still solid.

Meanwhile, higher sales at some businesses improved cash flow and enabled them to purchase more inputs, although demand was still lower than in May.

Lead times across the Kenyan private sector fell in June, as suppliers faced weaker capacity constraints and higher competition for deliveries.

At the same time, a number of goods remained in short supply due to the pandemic, leading to higher purchase prices.

Efforts to lower costs led firms to cut wages for the third month running, leading to back-to-back falls in overall input costs for the first time in the series history. Selling charges dropped at a solid pace, albeit one that was weaker than in May.

The outlook for business activity worsened again in June, dropping to the weakest since August 2016.

Overall confidence was linked to rising exports and plans to diversify products and expand company premises.