Private sector activity down in January

Kenya’s private sector activity dropped in January to a level last hit in April, hurt by lower household demand and poor weather that slowed output in many businesses, a survey showed on Wednesday.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for manufacturing and services fell to 49.7 in January from 53.3 in December. Readings above 50 indicate growth.

“Overall activity levels contracted solidly at the start of the year, as firms reported that a lack of money at households led to much softer demand pressure,” the survey report said.

“Poor weather conditions also curbed output at many businesses.”

The Finance ministry said in January economic growth probably slowed to 5.6 percent last year, compared with government’s initial estimate of about 6 percent, and from 6.3 percent in 2018.

The ministry expects growth of 6.1 percent this year, while the central bank forecasts economic output will expand 6.2 percent in 2020.

Kenya removed a cap on commercial lending rates in November. The cap, put in place in 2016, was blamed for stifling private-sector credit growth, especially to small businesses.

Jibran Qureishi, regional economist for East Africa at Stanbic Bank, said this would help improve business conditions.

“Business confidence for future output soared, which doesn’t come as a surprise given some of the recent reforms such as the repeal of the interest rate capping law and ongoing clearance of private sector arrears,” he said.