Nairobi — Kenya’s private sector activity contracted in February, weighed down by a steep weakening of the shilling, inflationary pressure on consumer spending and growing tax burdens for firms, a survey showed on Friday.
The S&P Global Kenya Purchasing Managers’ Index (PMI) fell for the first time since October to 46.6 in February from 52.0 a month earlier. Readings above 50.0 signal growth in business activity, while those below that point to a contraction.
Survey respondents attributed the drop to higher import costs after the currency depreciated and “reports of tax burdens”, which drove up costs, said Mulalo Madula, an economist at Stanbic Bank, which is involved in the survey.
“The increase in input costs and consequently output charges… is amongst the highest since the series began in 2014,” she said.
The shilling, which has been breaching a series of record lows for months, is down 3% versus the dollar so far this year, having weakened 9% last year.
Inflation (KECPI=ECI) rose to 9.2% in February from 9.0% a month earlier.
“Panelists frequently mentioned that lower demand due to rising prices and a lack of cash flow had led to the drop in activity,” S&P Global said in comments accompanying the survey.
*George Obulutsa; Editing: Toby Chopra – Reuters
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