Kenya’s private sector activity shrank for a third consecutive month in May as a relentless surge in operating costs forced businesses to cut jobs and pass expenses to struggling consumers.
The headline Stanbic Bank Kenya Purchasing Managers’ Index plummeted to a multi-month low, tracking well below the 50.0 neutral threshold that separates economic growth from contraction.
A sharp combination of domestic fuel price hikes, increased transport levies, and lingering global supply disruptions drove total corporate input costs up at the fastest pace seen since late last year.
Faced with eroding margins, companies aggressively raised their own output charges. This triggered severe customer resistance, causing new orders and domestic sales books to collapse at an accelerating rate.
Compounding the downturn, firms trimmed their workforces for the first time in over a year. Businesses primarily axed temporary and casual contracts to rein in overheads amid the demand slump.
The downturn hits as the government targets aggressive tax collection to manage public debt, a fiscal strategy that analysts warn could further depress consumer spending power through the second half of the year.
