Political unrest, weakening shilling dampen economic output

"Beyond that, the decline was the worst recorded since 2017 when excluding periods affected by Covid-19 measures."

The dip in performance caused the firms surveyed to have a dull outlook of the future. Just 14 per cent of the firms were positive regarding their output, with plans to expand and improve stock volumes.

"After climbing to a three-month high in June, the degree of confidence slipped in line with worsening demand conditions, with most respondents projecting only a neutral outlook," the PMI said.

The survey showed that declines in output and new orders further derailed the rate of hiring at the start of the third quarter.

Businesses reported only a marginal rise in employment over July, which the report said was the softest recorded in four months.

"The upturn was mostly driven by the agriculture sector, contrasting with reductions in construction, wholesale & retail and services as sales there decreased," the survey reads in part.

The Stanbic Bank Kenya PMI is compiled by S&P Global from questionnaires sent to purchasing managers in a panel of around 400 private sector companies.

The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale and retail,
and services.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

At 45.5, the July index was down from 47.8 in June, registering below the 50.0 neutral mark for the
sixth month in a row.

"The latest reading indicated a greater slump in operating conditions over July, with the pace of deterioration accelerating to the fastest in almost a year," the report said.

Standard Bank economist Christopher Legilisho said the July PMI headline trajectory was no surprise given events during the past month.

"Political protests, an increase in pump prices by approximately Sh12.61 in July, the further tightening of financial conditions as well as a further depreciation of the shilling - all of which saw the private sector deteriorating for a sixth straight month," he said.

Even so, he said, there were some positive indications that indicate economic resilience in the medium term.

"The agricultural sector rebounding has been supporting economic activity despite the construction, wholesale and retail, and services sectors slowing," said Mr Legilisho.

The survey reports price pressures in Kenyan companies to have remained severe during the period against a sharp rise in input costs due to the declining shilling against the US dollar.

Higher fuel prices and increased taxes were also cited by firms.

"Notably, the rise in overall input costs was one of the sharpest seen since data collection began in 2014, resulting in a robust and faster uplift in selling charges," the survey report said.

Data for the survey was collected between July 12-27.