The proportion of Kenyan private sector firms expecting to increase production has dropped to 56 percent, the lowest in the last 10 months, showing growing pessimism for the future as a cash crunch bites.
Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) covering October shows 43 percent of the respondents predict static business in the next 12 months.
The dimming outlook is in sharp contrast from June when over 92 percent of companies gave a positive prediction, citing plans to open new branches and expand into other markets as well as benefit from government spending in financial year 2019/2020.
“Output expectations weakened to a 10-month low amid reduced optimism for the future…while the general outlook for business activity at Kenyan companies remained positive, the level of sentiment dropped to the weakest since December 2018,” said the report.
Companies that retained optimistic forecasts related this to hopes of continued sales growth and greater business investment. October headline PMI dropped to 53.2 from 54.1 posted in September with cash circulation issues continuing to restrain business activity leading to backlog accumulation of orders for the sixth successive month despite softening demand.
Stanbic Bank said business orders rose in October but at a slower rate of growth compared to September.
However, backlogs were recorded as cash flow issues weakened firms’ ability to meet demand, according to the regional economist for East Africa at Stanbic Bank, Jibran Qureishi.