Kenya's private sector activities continued to suffer in March as importers struggled to bring in commodities due to dollar shortage.
According to the latest monthly Purchasing Managers' Index (PMI) data by Stanbic Bank, business activity and new orders decreased for the second month running amid rising prices and cash flow problems.
However, the rate of slowness lessened somewhat from the initial downturn in February, while businesses signalled renewed uplifts in employment and purchasing.
The overall PMI improved to 49.2 per cent compared to 46 points a month ago.
Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.
"Both output and new orders fell in March, particularly in wholesale and retail trade, due to lower demand, especially as price pressures have accelerated,'' Mulalo Madula, economist at Standard Bank said.
Nevertheless, inflation remained exceedingly sharp, with around 30 per cent of businesses reporting an uptick in purchase prices linked to problems accessing US dollars.
The latest increase in costs sent output price inflation to a five-month high, while related mentions of imported goods shortages led firms to seek safety stockpiles.
While many respondents continued to see demand fall due to high prices and a lack of money in circulation, others saw a recovery in customer orders, particularly from abroad.
Sector data signalled that the latest contractions in output and sales were centred on wholesale and retail companies. By contrast, manufacturing, agriculture, construction and services recorded expansions in both
The seasonally adjusted Input Prices Index ticked fractionally lower from February, and was still among the highest readings since the survey began in January 2014.
March survey data pointed to a renewed increase in firms' purchasing activity, after weak demand led to a reduction in the previous survey period.
According to survey respondents, the softer fall in new orders encouraged an increase in purchases, although the upturn was only marginal overall and weaker than those recorded throughout the five month growth sequence which ended in January.
The rise in purchasing reflected some efforts to build inventories of inputs, as firms reported that difficulties accessing US dollars had led to a shortage of commodities and longer delivery times.
Weakness in the Kenyan shilling against the US dollar meanwhile drove another marked increase in purchasing costs. Around 30 per cent of firms saw purchase prices rise since February, with increased taxes and fuel prices also cited.
A shortage of goods linked to US dollar supply issues and a higher exchange rate led to a deterioration in supply chain performance in March.
Though the rate at which lead times lengthened was only mild, it was nevertheless the sharpest seen since the initial Covid-19 lockdown in the second quarter of 2020.
Overall cost inflation remained among the highest seen since the survey began in January 2014, leading firms to raise their output prices at the quickest rate in five months.
Average prices charged by firms rose sharply in March, as the pace of inflation accelerated for the third month running to the quickest since October last year.
The data showed a considerable recovery in new export orders across the Kenyan private sector.
Adjusted for seasonality, the respective index climbed back above the 50 points no-change mark and to its highest level since December 2021.
The sharp increase in export sales followed one of the sharpest falls on record in February. Surveyed firms noted that greater marketing and a resolution to dollar supply issues at some clients were partly behind the rise.
On a positive note, businesses signalled a renewed expansion of employment numbers at the end of the opening quarter of the year, after staffing levels had contracted for the first time in six months in February.
Respondents linked the rise in jobs to a number of factors, including efforts to boost output, provide extra services and reduce backlogs. However, the release of some employees due to weak sales meant that the overall rate of jobs growth was only marginal.
