Private-sector activity slows as consumer demand falls

Private-sector activity slowed in March, a survey showed on Wednesday, dropping to its lowest level since the survey began in 2014, and falling below the threshold separating an expansion from a contraction.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dropped to 48.5, the first time the index had fallen below the 50 mark since the survey began in January 2014. A reading above 50.0 indicates growth.

“Most indicators of activity showed deceleration. Respondents to the survey indicated weaker underlying demand

conditions, exacerbated by financial constraints faced by customers,” Jibran Qureishi, regional economist for East Africa at Stanbic, said.

“The seasonally adjusted output index indicated that output contracted for the second month in a row.”

Like other countries in the region, Kenya is experiencing a drought that has hurt farming and left millions in need of food aid.

Inflation rose to 10.28 percent year-on-year in March, its highest level since May 2012, pushed by higher food prices.

Subdued underlying demand and less willingness to spend were reported as factors behind the decline in output.

The government capped commercial rates at 4 percentage points above the central bank rate last September, worsening already sluggish growth in private sector credit.