Business activity drops to a 5-month low on COVID-19 resurgence

Private sector activity in the economy has slumped to a five-month low in November on COVID-19 resurgence fears.

According to the monthly-published Stanbic Bank Kenya Purchasing Managers Index (PMI) productivity in local firms has softened significantly as new orders plateau.

The headline PMI reading fell sharply to 51.3 points in November from an all time high 59.1 points in October.

“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,” noted the report.

Subsequently, the local firms have marked a slow down in revenues even as they slam brakes on additional staff hires reversing a jobs recruitment trend recorded in October.

Firms have additionally marked a rise in overall costs but have kept selling prices down as they attempt to stimulate consumer demand to include the issuance of discounts.

Fears over a second COVID-19 infections wave are set to drive the output of local firms with business expectations across the next 12 months already falling to an all time low during the month since the creation of the PMI index in January 2014.

“Containment measures that were re-instilled last month were less stringent than before. However, the pace of the improvement in business activity slowed down partly due to a resurgence in COVID-19 cases. Additionally, firms noted that the reintroduction of lockdowns in parts of Europe also hurt external demand for their goods,” stated Stanbic Bank Fixed Income and Currency Strategist Kuria Kamau.