Kenya’s private sector has shrunk for the first time in seven months, with companies reporting lower output and fewer new orders in March.
The latest business survey shows activity contracted after months of steady growth. Factories and shops are feeling the squeeze from the fallout of the war in the Middle East.
Higher fuel prices, more expensive shipping, and tighter household budgets have all played a part.Money is simply not circulating as freely.
Families are watching their spending, which means fewer customers walking through the door.
At the same time, businesses are paying more for everything from diesel to imported materials because of rising transport costs and new taxes. Many can’t pass those extra expenses on to customers because demand is weak and competition is fierce.
As a result, order books have started shrinking, forcing companies to cut back on production.
Stocks of raw materials are being kept as low as possible to protect cash flow. Job creation has slowed to a crawl – the weakest pace since last October – and companies are clearing backlogs of work at the fastest rate in almost six years.
Despite the gloom, not everyone is downbeat. Around one in five business leaders still expect their companies to grow over the next year.
Many are planning to advertise more, sell online, widen their product range, and invest in new equipment and staff.For now though, the picture is clear: Kenya’s economy is feeling the ripple effects of conflict far away.
Rising living costs and disrupted supply lines are hitting ordinary Kenyans and the businesses that serve them. The coming months will show whether this is a short-term dip or the start of a longer slowdown.