Business activities picked up in August as Gen Z demos die out

 

Protesters kick away teargas canisters during Anti-Finance Bill 2024 demos in Nairobi on June 25, 2024. [File, Standard]

Kenya's business environment recorded a mild recovery in August, with firms raising their output levels for the first time in three months.

This is as the impact of the Gen Z-led street protests dissipated, according to the Stanbic Bank Kenya’s Purchasing Management Index (PMI).

The survey measures monthly private sector activity such as output, new orders and employment.

The anti-Finance Bill, 2024 demos, which later evolved into a nationwide public push for governance reforms, had a significant impact on the private sector as consumers held back spending decisions due to the ensuing unrest.

The Stanbic survey shows firms have broadly resumed normal operations, with activity levels rising for the first time since May 2024, also, for businesses, new orders are picking up marginally.

This is in the wake of relative peace following several reforms, including the withdrawal of the Finance Bill and the firing of the entire Cabinet, which saw the street demos lose their intensity before dying out a few weeks ago.

Additionally, despite firms increasing their purchases of input, employment fell for the first time this year.

“Pressure on import prices and taxation led to the sharpest rise in input costs since February, although overall inflationary pressures remained muted compared to the historical trend,” the PMI report by the lender released yesterday reads in part.

It also notes that selling charges also rose at a subdued pace amid reports of price discounting.

The input prices rose for a third straight month, reflecting higher taxes, increased import prices, and materials shortages.

The headline Purchasing Managers’ Index rose from 43.1 in July to 50.6 in August, posting above the 50.0 no-change mark for the first time since May. T

he reading thereby signalled a renewed improvement in business conditions in the private sector.

The rate of growth was moderate and the second quickest in over a year and a half. Output increased across three of the five broad sectors covered by the survey, with renewed growth in services, wholesale, retail and construction.

“By contrast, there were declines in activity across manufacturing and agriculture. New orders placed at Kenyan businesses also picked up in August, although the uplift was only slight. Some firms continued to highlight weak spending power at customers,” says the report.

According to Christopher Legilisho, an economist at Standard Bank, “August PMIs show the private sector recovering merely marginally. Output and new orders improved after slumping during the preceding months.

“However, concerns linger about consumer spending, with many firms noting overall demand as weak in a tougher economic and business environment. Consequently, firms cut employment after seven months of robust hiring; work backlogs therefore increased,” he said.

“Still, as output recovered in August, firms increased input purchases and inventories. Only manufacturing saw a decline in inventories, perhaps due to higher input costs. Business expectations worsened in August, implying firms as less hopeful about output over the next 12 months,” added Mr Legilisho.

With the marginal rise in sales following a steep downturn in July, firms opted to reduce their staff numbers over the latest survey period, marking the first decline this year.

According to survey respondents, there were also intensified cost pressures across the private sector in August due to rises in import fees and tax burdens.

The overall input price inflation rate was the strongest for six months but remained much softer than the historical trend.

According to the survey, while there were some efforts to pass on higher costs to customers, this was partly countered by price discounting.

“Despite an improvement in business conditions, confidence towards future activity levels sank further in August. The level of optimism was the lowest recorded in the series history (since 2024), with only 5 per cent of companies expecting growth over the next 12 months,” says the survey.