Kenyan business conditions continued to improve at the start of 2025, according to the latest Stanbic Bank Kenya PMI® report. The survey indicated a fourth consecutive month of expansion in output and new orders. However, growth momentum weakened as firms faced challenging economic conditions and slower client demand.
The headline Purchasing Managers’ Index™ (PMI) for January 2025 stood at 50.5, marginally down from December’s 50.6. While still above the 50.0 neutral mark, signalling ongoing private sector growth, the latest figure highlighted a loss of momentum in business activity.
Modest Expansion in Output and New Orders Kenyan companies reported a continued increase in activity and new work intakes during January. Respondents attributed the growth to new client referrals, enhanced marketing efforts, improved cash flow, and easing inflationary pressures. An uptick in stock volumes, evidenced by higher inventory levels, also contributed to the positive business environment.
However, the pace of growth in output and new orders slowed. The expansion in output was the weakest recorded in the current four-month growth cycle and only marginal. Similarly, sales growth eased to its lowest level since October 2024.
Price Pressures Remain, but Inflation Eases Slightly Despite solid price pressures, firms saw a moderation from December’s 11-month high. Many businesses responded by increasing their selling prices to offset rising costs. Although purchase prices for imported commodities continued to rise, the rate of increase slowed, with firms attributing the trend to higher taxes. Staff costs remained stable.
Employment Declines for the First Time in Five Months For the first time since August 2024, employment levels in Kenyan firms declined, albeit fractionally. The hiring slowdown reflected cautious business sentiment amid the challenging economic environment. Purchasing activity also saw a milder uplift as firms adjusted to the slowing pace of new orders.
Cautious Business Outlook Christopher Legilisho, Economist at Standard Bank, commented on the findings, stating:
“The Kenyan Purchasing Managers Index (PMI) expanded for a fourth month running in January but at a slightly weaker pace than in the two preceding months, reflecting the ongoing resilience of the private sector at the start of this year.
Positively, firms reported increases in both output and new orders, implying higher sales, more marketing, client referrals, and lower inflationary pressures. Firms were able to increase stocks purchased and inventories held to cover higher sales as well as the future likelihood of difficulty in finding materials. Some firms nevertheless reported harsh economic conditions. Still, employment conditions were relatively stable.
Kenyan businesses reported an increase in purchase prices for imported commodities, albeit a slower one than the preceding month, still attributed to higher taxes. Staff costs remained stable. Output prices increased but less briskly so as firms passed on higher input and purchase prices to customers. We would therefore foresee a slight easing in inflationary pressure during January than was the case in December.
The private sector’s confidence in January about the business outlook for the next 12 months remains weak, though better than in December.”
While the Kenyan private sector continues to show resilience, the slower pace of growth and persistent economic challenges highlight the need for careful business planning in the months ahead.
