The private sector in Kenya continued to show marginal growth in February, maintaining the positive trajectory observed since late 2024, according to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI®). However, the pace of improvement remained mild, as businesses grappled with weak demand and cautious future expectations.
The headline PMI registered at 50.6 in February, slightly higher than January’s 50.5, indicating a fifth consecutive month of growth. However, the reading remained below its long-term average of 51.2, signalling only a marginal improvement in business conditions. The continued expansion was largely supported by a stabilising economy, easing inflationary pressures, and improved cash flow for some businesses.
Sector Performance and Business Activity
Business activity saw a modest rise, marking the strongest expansion since November 2024. Surveyed firms cited stronger demand, a better economic environment, and increased marketing efforts as contributing factors. However, the improvement was uneven across sectors. Agriculture, manufacturing, and construction led the growth, while wholesale, retail, and services sectors saw declines in activity, new orders, and input purchases.
New orders rose for the fifth consecutive month, supported by new products and services, improved cash flow, and softer price pressures. Nevertheless, businesses continued to face challenges in boosting sales, with overall new business growth remaining slight.
Cost Pressures and Pricing Trends
February saw a slowdown in input cost inflation, with input prices rising at their slowest rate in four months. The easing was attributed to weaker increases in purchase prices, which in turn led businesses to implement only modest price hikes on their goods and services. Meanwhile, staff costs remained stable.
Despite these favourable cost conditions, businesses remained cautious about future growth prospects. The survey found that only 5% of firms anticipated an upturn in the coming year, marking one of the lowest confidence levels on record. Concerns over economic uncertainty and heightened competition contributed to this subdued outlook.
Employment and Inventories
Employment levels edged up slightly, reaching a four-month high, but remained below the long-run trend as businesses refrained from aggressive hiring. Similarly, stock levels increased, albeit at a weaker-than-average pace, as purchasing activity declined for the first time since July 2024.
Christopher Legilisho, Economist at Standard Bank, commented on the findings: “The February PMI for Kenya shows a private sector still growing, though only slightly faster, amid still weak demand. The positive expansions in output, new orders, and employment indicate a steady private sector over the past five months. However, demand improvements were not widespread across all sectors. Increased competition and financial pressures continued to weigh on businesses.”
Legilisho further noted that the prospect of lower interest rates could potentially spur business lending and drive economic activity in the coming months. He also highlighted the resilience seen in agriculture, manufacturing, and construction, with firms in these sectors increasing inventories and improving operational efficiencies.
Looking Ahead
While the private sector has sustained a growth streak since late 2024, the February data suggests that recovery remains fragile. Weak demand, high competition, and uncertainty over economic conditions continue to dampen business sentiment.
Going forward, businesses will likely look to lower interest rates and targeted investments in marketing and product innovation to drive further growth. However, the path to a more robust recovery will depend on broader economic stability and stronger consumer confidence.
The Stanbic Bank Kenya PMI® is compiled by S&P Global from a panel of around 400 private sector companies across agriculture, mining, manufacturing, construction, wholesale, retail, and services. The index serves as a key economic indicator, tracking changes in business conditions over time.
