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Private sector growth falls on Covid-19 resurgence

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Kenya’s private sector recorded a surprise decline in November as businesses lost ground amid concerns over resurgence of the coronavirus disease 2019 (COVID-19) pandemic.

The latest Stanbic Bank Kenya Purchasing Managers Index (PMI) Survey posted 51.3 during the month under review, a dramatic fall from a survey record of 59.1 in October and signaling a much softer and only modest improvement in overall business conditions – the least growth rate in five months.

September’s reading stood at 56.3 while the PMI index stood at 53 in August from 54.2 a month earlier – which until November was a consistent steady growth since the downturn caused by the Coronavirus (Covid-19) outbreak.

Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration.

“Key to the slowdown were weaker increases in business activity and sales, as firms commented on issues with money circulation and economic stress caused by a rise in local COVID-19 cases. Reintroduced curfew measures meanwhile led to a drop in client demand at some businesses, while lockdowns in Europe curtailed growth in foreign new orders,” the survey noted.

Following an impressive growth seen in the month of October, the rate of expansion in new orders slowed to the weakest seen in the current five-month sequence of growth in November, with the survey noting a further increase in client demand since the previous survey period, even though that was weighed on by reintroduced curfew measures and concerns over a rise in COVID-19 cases.

Kenyan firms were also able to reduce their levels of outstanding business in November, for the first time since June because of a weaker rise in new work.

“On the other hand job numbers in Kenyan companies were broadly stable during November, after returning to growth for the first time in eight months in October. According to respondents, hiring intentions were offset by a softer rise in new order volumes,” reads the report released on Friday.

Consumer Price Index CPI in Kenya averaged 38.77 points from 1984 until 2020, reaching an all-time high of 110.91 points in November of 2020 and a record low of 2.89 points in February of 1984.

Inflation came in at 5.5 per cent in November, up from October’s 4.8 per cent, marking the highest inflation rate since April even though the trend was unchanged with annual average inflation coming in at October’s 5.2 per cent in November.

Kenya’s economy has been hit hard by COVID-19, severely affecting incomes and jobs. The economy has been exposed through the dampening effects on domestic activity of the containment measures and behavioral responses, and through trade and travel disruption, affecting key foreign currency earners such as tourism and cut flowers.

Also hampered by the pandemic is Kenya’s shilling which continued to weaken against the dollar and on Friday and has been under pressure against the dollar for most of this year after earnings from the crucial tourism sector collapsed due to the coronavirus crisis.

The shilling weakened to an intra-day low of 111.50/70 at the start of trading, from December 2 of 110.70/90. It reversed that move after the central bank sold dollars to banks to reduce the volatility.

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