Business output falls for the fourth consecutive month, report says

Thursday, May 7th, 2020 00:00 |
Business output falls for the fourth consecutive month.

 Zachary Ochuodho @zachuodho

Business activities have declined significantly within the private sector as a sharp decline in purchases dipped for the fourth consecutive time,  Stanbic Bank Purchasing Managers’ Index (PMI) report has said.

The report released yesterday said the shortage of inputs and travel restrictions imposed to contain coronavirus contributed to the decline in demand for goods in Kenya and globally.

“At 34.8 in April, down from 37.5 in March, the headline index fell for the fourth successive month and signalled a severe decline in overall business conditions,” says the report, whereby below 50 is a dip in performance.

Jibran Qureishi, Regional Economist East Africa at Stanbic Bank, said the contraction by Kenyan firms was due to a steep drop in demand as customers were concerned about the spread of Covid-19.

“Sales to foreign clients were substantially down, particularly with regard to European countries where lockdown measures were widespread,” he said.

Qureishi said most companies reported difficulties in obtaining inputs mainly due to weaker supply of items and constraints on vendors amid curfew in Nairobi.

He said the delivery times increased at a record pace, while stock levels were curtailed sharply as firms noted that the duration of the pandemic remained unknown.

The uncertainty led to a rapid weakening in business expectations for the next 12 months, with sentiment falling to the second-lowest in over three years.

As a result, firms shed jobs at the fastest pace in the survey history, with wages also reduced amid efforts to lower costs.

“Despite falling output and employment, backlogs eased for the second month running as inflows of new work decreased.

Weaker input demand, meanwhile, led to a softer uptick in raw material prices, although this was partly offset by shortages of goods such as foodstuffs and medicine,” the report said.

The overall easing of input price inflation encouraged firms to reduce selling prices, amid hopes that this would improve customer spending. 

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