Kenya private sector activity declines at slower pace in Dec – PMI

NAIROBI (Reuters) – Kenya’s private sector activity declined in December but at a slower pace than a month earlier, helped by easing inflation, with the service sector experiencing improved business conditions, a survey showed on Thursday.

The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) rose to 48.8 in December from 45.8 a month earlier. Readings above 50.0 signal growth in business activity, while those below point to a contraction. It is the fourth consecutive month that the reading has stayed below 50.

“According to anecdotal evidence, customer turnout and purchasing power improved amid a softening in inflationary pressures, especially across the services sector,” the survey compilers wrote.

“On the flip side, contractions in output and new orders remained sharp in the manufacturing and construction sectors, as firms continued to signal cost-of-living pressures and weak demand conditions.”

Inflation slowed to 6.6% year-on-year in December from 6.8% the previous month, data from the statistics office showed.

However, the survey showed a weakening shilling and the effects of tax rises were still pressuring input costs.

“Firms indicated that input costs and purchase cost pressures were primarily due to higher taxes among other factors,” said Christopher Legilisho, an economist at Stanbic Bank.

“There was a notable reprieve from fuel and transport costs that moderated during the month. Still, business expectations for the year ahead remain quite weak based on the survey results from respondents.”

(Reporting by George Obulutsa; Editing by Hugh Lawson)