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Kenyan firms pass costs from extended poll period to consumers

Mr Jibran Qureishi, Stanbic Bank regional economist. FILE PHOTO | NMG
Mr Jibran Qureishi, Stanbic Bank regional economist. FILE PHOTO | NMG 

Businesses raised prices for the first time in six months in October as their ability to absorb rising costs weakened in a tough economic climate roiled by a prolonged electioneering period.

Stanbic Bank #ticker:CFC said in its monthly market survey that firms were forced to pass the upward cost pressures on to consumers last month as industrial output tumbled to lows last seen in January 2014.

The politics-induced downturn pushed firms into trimming their payroll numbers, according to the Kenya purchasing managers’ index (PMI) survey.

“A reduced ability among firms to absorb upward cost pressures was evident as they raised their selling prices in October. This ended a five-month period of decline,” said the survey released Friday.

Political rhetoric

Since the Supreme Court annulled President Uhuru Kenyatta’s victory on September 1, both the opposition and the ruling Jubilee Party have engaged in increasingly bitter rhetoric.

The country held a repeat poll on October 26 but opposition leader Raila Odinga boycotted the process, giving President Kenyatta a free pass.

Mr Odinga has since called for an economic boycott and civil disobedience from his supporters in order to push for electoral reforms, further dimming the country’s future business prospects.

“The heated political temperature has resulted in a challenging couple of months for Kenya’s private sector. Indeed, the month of October saw the PMI fall to another record low as output, new orders and employment all contracted,” said Jibran Qureishi, Stanbic’s economist for East Africa.

The Stanbic survey indicates that the country’s PMI fell to 34.4 in October from 40.9 a month earlier, a new record low since the data series began in January 2014.

The figure is also well below the 50-point line separating contraction in activity from expansion.

“That being said, the recent rains should be broadly supportive of the agriculture sector and if this is combined with an end to the political impasse, then the private sector in general is likely to begin showing some much needed signs of improvement over the near to medium term.”

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