- The headline figure derived from the survey dropped to a four-month low of 45.8 points from 46.20 in October.
- The reading marked the third contraction in as many months and was among the weakest seen in the index's near decade-long history.
Image: GEORGE MUGO
Business conditions in Kenya maintained a steep decline halfway through the final quarter of the year, amid near record high falls in output, new orders and employment.
According to the Standard Bank's Purchasing Managers' Index (PMI) for November, firms across the private sector reported that rapid inflation continued to suppress demand and create cash flow challenges, leading to further cuts in activity, staffing and purchasing.
"Inflationary pressures on firms stayed near record levels during November, following October's historic uplift, as companies widely reported currency depreciation, higher taxes and increased fuel charges,'' the monthly index reads.
Christopher Legilisho, an economist at Standard Bank said deterioration reflects a difficult business condition for the private sector.
"Inflationary pressures and cash flow difficulties saw customer spending declining, and the rate of job losses increasing in the private sector because of weaker output and reduced workloads,'' Legilisho said.
The shilling has dropped against major international currencies in the past 18 months, breaking record lows daily. It has sunk 22 per cent in just a year to close at 153.40 units Tuesday.
Fuel on the other hand is retailing at a record high following a double increase in Value Added Tax to 16 per cent as the government ramps up revenue collection to fill budget gaps and cut borrowing.
In the November review, a litre of petrol hit a historic Sh217.36 up from Sh177.3 a similar period last year a Sh40.06 jump. Diesel has gone up by Sh41.47 per litre to retail at Sh203.47 up from Sh162 over the same period.
Kerosene is now retailing at Sh203.06 per litre at the pump; an increase of Sh57.12 compared to a pump price of Sh145.94 same period last year.
The rise in input costs translated into another marked uplift in firms' output charges, which was also slightly softer than October's survey record.
The headline figure derived from the survey dropped to a four-month low of 45.8 points from 46.20 in October.
Readings above 50.0 signal an improvement in business conditions in the previous month, while readings below 50.0 show deterioration.
The reading marked the third contraction in as many months and was among the weakest seen in PMIS's near decade-long history.
Driving the downturn in operating conditions was another historic increase in business costs during November.
After reaching the highest level in the series history one month ago, the rate of input cost inflation remained marked and was the second fastest on record.
Likewise, output prices increased at a near-record pace in the latest survey period, as companies often passed on costs to clients to maintain their margins.
Rapid inflationary pressures on businesses and customers alike resulted in sustained contractions in activity and new business.
The survey data indicated a sharp fall in new order volumes, one that was similar to October's and among the worst on record.
Reports from survey members showed that customer spending had fallen due to increased prices and cash flow challenges.
Subsequently, output levels were pared back at a steep and accelerated rate. Contractions were seen in nearly all sectors, with agriculture the only broad category to record an expansion.
By contrast, construction firms suffered the worst declines in new orders and output. Reductions in output and new orders led to quicker falls in purchasing and employment at Kenyan firms in November.
Most notably, staff numbers dropped at one of the sharpest rates on record, with stronger falls only registered during the first Covid-19 lockdown.
Lower input purchases helped to shorten delivery times for the second month running, although the improvement was only slight.
Finally, business expectations for the coming year were subdued and dropped slightly to a four-month low.
In total, just 17 per cent of companies were confident of growth, linked to expansion plans and the launching of new products and services.
This corroborates a recent statement by the Federation of Kenya Employers that Kenya has lost approximately three per cent year-on-year (70,000) of the jobs in the formal private sector due to the rising cost of doing business.
On the pricing front, Kenyan businesses reported increasing inventories and therefore raised selling prices in November.
Rising input prices and purchase price pressures are being attributed to further increases in fuel prices, electricity costs and taxes among other factors.
“Exporters continued to perform strongly, helping to offset weak domestic output, as demand from Europe and Asia was greater. Still, the business outlook for the next 12 months is quite weak based on the survey results from respondents.”