Manufacturers, wholesalers, and retailers are grappling with cash flow hitches on reduced demand for goods, reflecting the deteriorating pace of business activities. PHOTO | SHUTTERSTOCK
Manufacturers, wholesalers, and retailers are grappling with cash flow hitches on reduced demand for goods, reflecting the deteriorating pace of business activities.
The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) survey showed manufacturers and retailers were the main drivers behind the fall in the pace of business activities for the fifth month running in January.
The worsened performance by manufacturers, wholesalers, and retailers was despite firms in other sectors, including agriculture, construction, and service sectors, posting increased activity in January.
“The drop in buying activity was generally driven by a reduction in new orders. Indeed, the manufacturing and wholesale and retail sectors, which posted lower sales, were the main drivers of the contraction in purchasing,” said the survey.
The PMI survey showed while the index rose to 49.8 in January from 48.8 a month earlier, manufacturers and retailers continued to face a weak demand for their goods, hurting their optimism about the future.
“Agriculture, construction, and service sector companies reported increased activity. However, there were further declines in manufacturing and the wholesale and retail sectors, with firms remaining under pressure from insufficient cash flow,” said Christopher Legilisho, an economist at Standard Bank, which is behind the PMI surveys.
The outlook by firms on output ticked down to an eight-month low in the period when just a tenth of businesses expressed optimism for the year ahead.
The survey said weak client demand and cash flow problems continued to hit sales at many firms, even as a few others noted improvements in order books and foreign sales. Overall, the purchasing activity in January fell at a faster pace than in December.
“Business confidence in the Kenyan economy weakened for the third month in succession in January. Despite falling only slightly since the end of 2023, this brought overall sentiment to the weakest level since last May,” said the survey.
The headline PMI rose to a five-month high of 49.8 in January, up from 48.8 in December, and was almost level with the 50 mark, which signals a stabilisation. This was mainly due to slower contractions in activity and new orders, as well as increased temporary jobs. The January PMI marked the fifth consecutive month the reading has stayed below 50.0.
Readings above 50.0 signal growth in business activity, while those below point to a contraction.
The survey said while many companies reported a drop in sales from reduced client spending and cash flow problems, higher sales and a positive impact from marketing were seen in many businesses involved in exports.
The rate of growth in exports accelerated for the fourth month running to the sharpest recorded in just over two years, according to the survey, which cited a pick-up in demand from the UK and German markets.
