Kenyan private businesses reduced stock for the first time in seven months according to the Stanbic Kenya Purchasing Managers Index (PMI) for the month of September.
The PMI noted that the private sector registered a negative growth after a brief respite in August.
“The PMI slid back into negative territory at the end of the third quarter, as firms saw a sharp contraction in new orders following a brief respite in August,” the survey noted.
The contraction was pegged to elevated inflationary pressures and rising fuel costs that negatively impacted sales.
High inflation also led to the second-fast rise in input costs in almost 10 years according to the survey.
“Businesses responded by reducing their output levels solidly during September and made cuts to both employment and inventories for the first time in seven months,” the PMI read in part.
While inventory went down, a record increase in input costs saw selling charges rise sharply as business owners passed costs through to customers.
Rising fuel prices hurt the majority of businesses right across manufacturing, services, wholesale, retail, and construction sectors.
Apart from the high inflation and increased fuel prices, a weak shilling also played a key part in making businesses reduce stock.
The Kenyan Shilling dropped 17 per cent in the exchange rate against the dollar which has led to increased costs for imports mainly raw materials for industrial use.
The agricultural sector was the only area that saw output and new orders expand although at a slow rate.
Christopher Legilisho, Economist at Standard Bank, remarked that the private sector would continue being burdened by increased taxation.
“Furthermore, rising interest rates have been weighing on consumer demand, business levels, and expectations,” Legilisho added.