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Kenyan private sector firms faced unprecedented inflationary pressures in October driven by the rise in fuel prices and ongoing currency weakness, the latest Purchasing Managers Index (PMI) report indicates.

The survey published by Stanbic Bank Kenya shows input costs rose the steepest in a decade last month, with the uplift in costs most pronounced in construction sector, eroding spending power and leading to a marked fall in new orders as less goods were sold leading to significant job losses since mid 2020.

New orders contracted

It said these factors had a combined effect of driving down the headline PMI index to 46.2, below the 47.8 recorded in September, signalling a deterioration in business conditions in October. Readings above 50 signal an improvement in business conditions on the previous month, while those below 50 show a deterioration.

“The Kenya Purchasing Managers’ Index (PMI) deteriorated markedly in October. Output and new orders contracted across all sectors surveyed, with new orders falling the fastest in the construction, wholesale and retail sectors,” Christopher Legilisho, an Economist at Standard Bank said.

“Cost-of-living pressures and cash flow difficulties saw customer demand declining, while weaker output and lower workloads led to an increased rate of job cuts,” he added.

An estimated 46 per cent of monitored firms reported that total expenses had increased from September, driven by a further uplift in fuel prices and associated transport costs.

In addition, companies noted that ongoing currency weakness and increased tax burdens had added to costs,” the managers said.

The PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies.

To maintain sufficient margins, firms increased their selling prices to unprecedented levels in October, with the rate of inflation climbing to 6.9 per cent and above the previous high in mid-2022, a development that led to accelerated decline in new order volumes, which was broad-based across all sub-sectors but steered by the construction, wholesale and retail.