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February 16, 2019

Private sector activity drops marginally in November- survey

Customers inside a banking hall. /FILE
Customers inside a banking hall. /FILE

Firms maintained high charges for finished products due to higher production costs incurred last month as a result of the rise in fuel and material costs.

The monthly Stanbic Kenya Bank Purchasing Managers’ Index shows operations by private companies dropped marginally to 53.1 from 54 last month with some firms citing higher level of transport charges due to the enforcement of the stringent traffic laws.

“Many of the panelists that raised selling charges pointed to the general markup in prices across the market,” the survey stated.

According to the survey, demand for new orders and exports grew at a slower pace last month compared to October. This in turn reduced growth in output.

The monthly indicator is based on activity in the manufacturing and service sectors with readings above 50 signalling an improvement in business conditions, while any figure below this indicates poor performance.

Stanbic economist Jibran Qureishi said despite the slight dip recorded last month, private sector remained robust.

“In fact, costs remained relatively muted despite the Michuki transport rules which had raised costs earlier in the month as electricity and food prices declined,” he said.

Qureishi said lower global oil prices recorded during the review period would keep down production costs in the coming months, in turn lowering consumer prices and increasing purchasing activity.

During the review period, firms reduced the rate of job creation compared to October while staff costs increased marginally.

The survey shows despite a reduction in output, firms were able to meet demand with through accumulated backlogs which eased to a three-month low.

In addition, weaker demand growth reduced the pressure on unfinished orders.

Manufacturers noted improved performance by vendors last month who increased the pace at which goods were delivered. They continued to associate this with high competition among suppliers.

“Lead times have shortened throughout the majority of the survey history, yet the latest improvement was stronger than average. Firms found that suppliers were quick to deliver inputs because of high competition in the market,” the report stated.

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