- The index was down to 41.5 from 50.6 in March and at its lowest reading since May 2020.
- The degree of optimism for the forthcoming 12 months fell to the weakest seen since the survey began in 2014
The Kenyan economy suffered a sharp contraction during April, as the latest private sector performance survey indicated the first declines in activity and new business since June last year.
The partial lockdown in five counties including Nairobi, and increased curfew hours, had a considerable impact on movement and demand, with the decrease in new orders the most marked since May last year.
According to the monthly Purchasing Managers Index (PMI) released by Stanbic Bank Kenya on Wednesday, the index fell sharply below the 50.0 neutral value in April, posting 41.5 to indicate a marked deterioration in business conditions.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
The index was down from 50.6 in March and at its lowest reading since May 2020.
Subsequently, employment numbers, input purchases and inventories were all lowered, but cost pressures continued to rise due to higher fuel prices and supply shortages. Meanwhile, the outlook for future activity weakened to the lowest seen since the survey began in 2014.
The Increased restrictions on businesses in several counties meant that output levels fell at a severe rate during April, as roughly 43 per cent of respondents saw an overall decline.
According to Kuria Kamau, fixed Income and currency strategist at Stanbic Bank, business activity contracted in April following the reimposition of more stringent public health restrictions at the end of March.
''The increased restrictions resulted in lower demand which forced firms to cut back on output and spending on inputs. Despite a continued rise in input prices driven by higher global commodity prices, several firms offered discounts to customers to try to improve sales,'' Kamau said.
New business also decreased markedly, and at a pace beginning to approach those seen in the first half of 2020 during the initial Covid-19 lockdown.
As a result, firms cut employment numbers for the first time in seven months and reduced backlogs at a quicker rate compared to March.
Input buying was also lowered, contributing to a solid contraction in overall inventories.
At the same time, input costs rose sharply due to an increase in fuel prices and raw material shortages linked to global supply issues.
While this led to a fourth successive rise in output charges, the rate of inflation eased to the weakest seen in this sequence as several businesses offered discounts to try to improve sales.
With demand for inputs falling, supply chain performance improved again in April as vendors had fewer deliveries to make. However, lockdown restrictions led to delays for a number of firms, with the overall reduction in lead times the slowest for 11 months.
Companies were notably less confident about future output growth in April as a result of the severe impact of lockdown measures.
The degree of optimism for the forthcoming 12 months fell to the weakest seen since the survey began in 2014, with just over one in five respondents predicting an expansion in output.