Kenya’s private sector economy showed signs of strain in May, as the latest Stanbic Bank Kenya Purchasing Managers’ Index™ (PMI®) dipped below the critical 50.0 threshold, signalling a slight decline in business conditions for the first time in seven months.
According to data compiled by S&P Global, the PMI fell from 52.0 in April to 49.6 in May, indicating a modest contraction in overall private sector performance. The drop was primarily attributed to a combination of rising input costs and weakened consumer demand, which led to a reduction in both output and new orders.
“The Stanbic Kenya PMI signalled fragility in the private sector’s recovery,” said Christopher Legilisho, Economist at Standard Bank. “There was a moderate contraction in output, and a decline in new orders after seven months of expansion. Consumers remain hesitant to spend due to concerns about their economic state and the dim outlook.”
Rising Costs Dampen Demand
Input prices rose at the fastest pace in four months, with firms pointing to increased materials costs and heightened tax obligations. However, despite mounting cost pressures, selling prices grew at the slowest pace since October 2024, as businesses attempted to ease the burden on customers.
“There was a softer increase in output prices and a moderate increase in input prices, especially in manufacturing,” added Legilisho.
Sector Performance Mixed
The decline in business activity was particularly evident in construction, wholesale and retail, and services. Conversely, agriculture and manufacturing sectors recorded modest growth.
Approximately 33% of surveyed firms reported reduced output, while 29% noted an expansion. New order volumes also declined for the first time since September 2024, reflecting weaker customer demand under difficult economic conditions. However, some firms did benefit from new client acquisition and improved marketing efforts.
Employment and Inventory on the Rise
Despite the broader downturn, staffing levels inched up slightly in May, with firms mainly hiring short-term workers to complete ongoing projects. Stocks of purchases increased for a fifth consecutive month, although at the slowest rate since February.
Supplier performance remained largely stable, with delivery times shortening marginally for the fourth straight month.
Business Confidence Remains Subdued
Expectations for future output remained pessimistic, with only 4% of surveyed companies anticipating an improvement in the next 12 months. Firms cited upcoming branch openings and enhanced marketing strategies as potential growth drivers.
Summary of Key Indicators – May 2025
- PMI: 49.6 (April: 52.0)
- Output: Contracted at fastest rate in 10 months
- New Orders: Fell for first time since Sept 2024
- Employment: Slight increase
- Input Prices: Rose at highest pace since January
- Selling Prices: Weakest rise since October 2024
- Business Expectations: Second-lowest on record
The PMI survey, based on feedback from around 400 firms across key sectors such as agriculture, manufacturing, construction, wholesale, retail and services, provides a timely snapshot of Kenya’s economic pulse. The May figures suggest that while the private sector’s fundamentals remain intact, consumer caution and rising costs are dampening growth prospects.
