Companies sustained job cuts into December as a response to reduced sales, a closely watched study suggests, pointing to a bleak festive period for families battling depressed earnings.

Kenya’s private sector firms reported that orders for goods and services in December fell for the first time in at least a decade, prompting them to cut output and send workers away due to lack of work, according to survey findings based on feedback from about 400 corporate managers.

It marked the first time in survey's history, dating back to 2014, in which Christmas and New Year celebrations failed to lift overall demand into growth territory, analysis of Stanbic Bank Kenya’s Purchasing Managers Index (PMI) shows.

Activity in the private sector has been subdued since September 2023 on the back of new and higher taxation measures, increased cost of fuel, a surge in electricity bills and costly raw materials as a result of lingering global supply constraints amidst a persistently depreciating shilling against major global currencies.

And even though Christmas and New Year shopping eased the pace of decline in demand, output and employment in preceding three months, it was not enough to lift activity into growth momentum.

“Employment numbers in the Kenyan private sector dropped for the fourth consecutive month in December, as firms signalled that weaker new order inflows resulted in lower workloads,” analysts at Stanbic Bank and American analytics firm, S&P Global, wrote in the December PMI.

“However, after recording the sharpest fall since June 2020 in November, the pace at which job numbers fell was softer and only slight overall.”

The overall PMI reading — a gauge for month-on-month private sector activity such as output, new orders and employment — increased to 48.8 in December from 45.8 a month earlier, pointing to softer drop in activity.

Reading below 50 signal a drop in business deals compared to the previous month, while levels above that mark denote growth.

The PMI report suggests while the services sector reported growth in deals in December, manufacturing and construction sectors continued to endure falling demand for goods and services, pulling the overall performance down.

Manufacturing sector has been suffering under the weight of increased operating costs amidst eroded consumer purchasing power, while construction has been hit by a cut in development budget by the government.

“We’ve witnessed slow consumption at retail and distributor and wholesale stock holding is on the rise due to low sellout,” Bharat Shah, the chairman of Kenafric Industries, told the Business Daily.

A confluence of rising input costs and softening demand sparked off a wave of job cuts in the private sector in the last quarter of last year.

A separate survey by the Central Bank of Kenya similarly suggested that slightly more than a quarter (26.3 percent) of surveyed firms had planned to lay off workers before end of last year, citing increasing cost of doing business and flagging sales.