COVID-19 infections surge rattles business confidence

Optimism for growth inside Kenya’s private sector businesses has slumped to an all-time low on the back of a new surge in COVID-19 infections.

This is according to the Stanbic Bank Kenya Purchasing Managers Index-PMI which was published on Wednesday and which shows business optimism at the lowest level in the eight-year series history.

Only 19 per cent of respondents in the survey gave a positive outlook on business prospects over the next 12 months.

The record rise in COVID-19 infections has seemingly caused jitters over the potential return of restriction measures which characterised large parts of 2020 and 2021 including the night time curfew, inter-county travel restrictions and the partial closure of bars and other entertainment facilities.

Nevertheless, private sector activity expanded for a third straight month in December with both output and employment staying unchanged to reflect the continued health of the private sector economy.

“Both domestic and export demand expanded rapidly on account of fewer public health restrictions, locally and around the world. Export firms particularly noted increased demand from Europe and parts of Africa,” noted Stanbic Bank Fixed Income and Currency Strategist Kuria Kamau.

Overall, sales volumes rose at the fastest pace since October 2020, driving purchasing, inventories and employment.

Output levels stood at their highest rate in December since the start of 2021 forcing firms to raise their staff levels to meet higher workloads.

Firms nevertheless faced higher prices for raw materials from ongoing supply chain constraints and high demand.

During the month, the Stanbic Bank PMI reading strengthened to 53.7 points from a flat 53 points in November.