Nearly 90 percent of local private sector firms do not expect a rise in business activities in 2023 amid fears of a slowdown in the global recession.
The output expectations contained in the December Stanbic Bank Kenya Purchasing Managers Index (PMI) survey, which was published on Thursday is among the lowest in the survey’s nine-year history.
Only 11 percent of firms expect output to rise in 2023 as confidence takes a battering from concerns about the global economy.
In contrast, the majority 89 percent of the survey’s respondents forecast no change in activity.
“As a result, inventory gains were moderate (in December) and concentrated in the agricultural sector, with declines recorded elsewhere. This outlook partly reflects the nature of the current global environment, in which a slowdown in exports is likely to slow business activity,” stated Standard Bank Economist Mulalo Madula.
Despite tapered inflationary pressures at the end of 2022, private sector firms are weary of standalone risks such as new taxes in the middle of the year which could once again drive up costs.
“Moderate inflation is likely to be one of the few positive factors in the second half of 2023, with fewer supply chain disruptions, favourable weather conditions and lower energy prices. However, idiosyncratic factors including taxes, are likely to dislocate inflation in the first half of the year,” added Mr Madula.
Despite the gloomy 2023 outlook, private businesses registered the fourth straight month of expansion in December as new orders rose on improving demand.
The businesses saw sales rise by the highest rate since February with uplifts in the sectors of agriculture, manufacturing, wholesale and retail albeit declines recorded in construction and services.
Besides increased demand, greater marketing and higher output were other factors driving sales growth in December.
Given the expansion to the business activity at the end of the year, job creation rose by the highest rate since March which served to reduce the backlogs of work in the month.
Private firms cut wages for the second straight month as the entities marked increases in both input and purchase prices.
The firms have continued to raise prices to customers with the survey’s respondents linking the mark-ups to efforts to maintain profitability.
The rise in output prices across December was however the slowest since August as private firms marked a slowdown in costs which grew at the lowest rate in a year.
The lower input prices fell in line with easing cost pressures as inflation fell for the second consecutive month to 9.1 percent in December from 9.5 percent in November.