Kenya PMI Hits Record Low

Private sector activity in Kenya dropped to a record low in October as prolonged political instability exerted a heavy toll on the economy, survey data showed on Friday.

The Markit Stanbic Bank Kenya purchasing managers’ index for manufacturing and services slumped to 34.4 from 40.9 in September, its lowest since the series began in January 2014, Reuters reported.

 “The heated political temperature has resulted in a challenging couple of months for Kenya’s private sector,” said Jibran Qureishi, economist for East Africa at Stanbic Bank.

Output has contracted for six straight months, according to the PMI, and Qureishi said last month’s drop was the sharpest since the series began, as output, new orders and employment contracted.

The Supreme Court nullified an August ballot in which President Uhuru Kenyatta was re-elected, ordering a re-run held on Oct. 26 that Kenyatta also won. Opposition leader Raila Odinga boycotted that poll, which was marred by violent protests.

The economy grew 5% in the first half of the year, the government said, falling short of its full year forecast of 5.5%. Political uncertainty was compounded by a severe drought in the first quarter.

The International Monetary Fund cut its 2017 growth forecast for this year to 5% this week from its initial forecast of more than 5%.

Kenya is East Africa’s richest economy by per capita income and serves as the regional headquarters of several international firms.

Meanwhile, the Kenyan shilling made modest gains against the dollar on Friday with foreign exchange earnings from horticulture exports outpacing demand from retailers and oil importers, traders said. Commercial banks quoted the shilling at 103.50/70 per dollar, compared with 103.60/80 at Thursday’s close.