Job creation at weakest pace in months on election jitters

Production Workers at a Nairobi- based food processing factory. FILE PHOTO | NMG  

By CHARLES MWANIKI


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Summary

• The Stanbic Bank
• IHS Markit Purchasing Managers Index (PMI) shows the month was the worst performing since the survey began in January 2014.
• It shows that firms have been struggling to attract demand for goods and services and have in turn cut their production or output.
• The economy is also going through its slowest period of credit growth in more than a decade.

Job creation by Kenyan firms slowed down in June as they adjusted to a tougher operating environment attributed to political jitters and lack of credit.

The Stanbic Bank IHS Markit Purchasing Managers Index (PMI) shows the month was the worst performing since the survey began in January 2014.

It shows that firms have been struggling to attract demand for goods and services and have in turn cut their production or output.

They have linked lower business activity to a lower customer turnout due to the political climate and weaker purchasing power among clients, the PMI report says.

“The private sector continues to slow down due to the political uncertainty ahead while reduced access to credit has also led to subdued domestic demand.

Furthermore, Kenya’s GDP expanded by just 4.7 per cent in the first quarter of 2017, which in a way verifies the weaker growth trend being indicated by the Stanbic PMI since January 2016,” said Stanbic regional economist Jibran Qureishi.

“Employment rose at the weakest pace in four months and one that was only marginal overall… which contributed to a rise in backlogs despite flat new business.”

Companies thus struggled to create new business both on the domestic and export fronts. They recorded reduced holdings of input stock and cut their purchase of raw material, the report says.

It (index) was down to 47.3 from 49.9 in May. Readings above 50 on the index signal an improvement in business conditions on the previous month, while those below 50 show a deterioration.

Campaigns for the August general election have sometimes been characterised by rhetoric that has led to fears of possible unrest, thus spooking both businesses and customers.

The economy is also going through its slowest period of credit growth in more than a decade.

Latest Central Bank data shows that in the one year to March 2017, credit to the private sector grew by only 3.3 per cent, far below the preferred 12 to 15 per cent considered optimal to fuel economic growth.