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Private sector maintained modest growth in December

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Kenya’s private sector recorded a modest growth in December last year, with output rising at the slowest rate in six months, even though new orders quickened marginally.

The latest Stanbic Bank Kenya Purchasing Managers Index (PMI) Survey posted 51.4 during the month compared to 51.3 in November, signaling a retiring improvement in business conditions – with the expansion softer than those seen from July to October as the economy recovered from the COVID19-led downturn.

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

During the month under review, business confidence slipped below November’s previous record low at the end of the year with business owners expressing concerns over the impact of the pandemic on future activity.

“Kenyan businesses continued to expand their output modestly at the end of the year. The rate of growth eased fractionally from November, and was the softest in the current six-month run of expansion,” reads the survey released yesterday.

The panelists added that, “Improved cash flow, looser COVID-19 restrictions and higher customer orders drove the upturn, according to surveyed firms, although some companies reported weak client purchasing power.”

Kenya’s private sector recorded a surprise decline in general performance in November as businesses lost ground amid concerns over resurgence of the Covid-19 as lack of new orders saw the economy take a beating as the second wave of infections forced breaks on spending.

This saw less people being employed during the period under review after massive layoffs that began in the month of March leaving many without jobs.

After falling in November, the seasonally adjusted Purchase Prices Index made up lost ground in December, and indicated the sharpest rate of price inflation for nine months even though purchasing costs rose solidly during the month.

During the month, most companies said raw materials were in short supply coupled with logistical issues and currency weakness which also saw higher costs for most businesses.

The survey further shows that delivery times at Kenyan companies improved for the seventh month in a row in December, but at the weakest rate in this period.

However, some suppliers held back input deliveries due to a lack of payment, while there was also disruption to global supply chains from the pandemic.

“This slowdown was inevitable following the significant improvements in economic activity witnessed in October after the relaxation of public health restrictions. Furthermore, a resurgence in COVID-19 cases as well as the re-introduction of lockdowns in some international markets has lowered expectations for the post pandemic recovery in 2021,” commented Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank.

The report also indicates modest private sector job growth and company expansions in the private sector. Overall, firms remained optimistic of an expansion in output by the end of 2021.

Efforts to lower wage bills by most companies led to a further drop in overall staff costs in December, according to the survey – with the rate of decline quickening from November, but remained marginal and far softer than seen earlier in the year during the worst of the COVID-19 outbreak.

Indeed the month also saw the input cost inflation faced by Kenyan companies accelerating, after dipping to the lowest in five months in the previous month.

The acceleration was largely related to increased costs surrounding the purchasing of inputs. In contrast, staff pay decreased for the second month running, and at a quicker pace.

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