Business activity in Kenya’s private sector rose sharply in October, reaching its fastest pace in more than three years, buoyed by improving demand, easing inflation, and stronger sales, according to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI).
The PMI — compiled by S&P Global — climbed to 52.5 in October, up from 51.9 in September, marking the second consecutive month of expansion and the highest reading since February 2022. Any reading above 50.0 signals an improvement in business conditions from the previous month.
Demand rebound lifts activity
The report shows that output and new business intakes grew for a second straight month, with both rising at a faster rate than in September. Firms attributed the uptick to stronger consumer demand, improving economic conditions, and new product launches supported by promotional pricing strategies.
“All the main sectors monitored by the survey recorded growth during the month, signalling a broad-based recovery,” the report stated. “In terms of output, the latest expansion was the strongest since December 2021.”
Firms ramp up purchasing
Encouraged by higher sales, businesses increased their purchasing activity for the first time since April and expanded inventories in anticipation of continued demand. Supplier performance also improved, with delivery times shortening for the ninth consecutive month, reflecting greater efficiency and competition among vendors.
Employment levels were largely stable, with firms opting to retain existing staff rather than embark on significant hiring drives.
Inflation pressures ease
Input costs rose only marginally in October, with overall price inflation slowing to its weakest level in 13 months. Both purchase prices and wage costs increased at a softer rate compared to September, while output prices remained stable.
Firms that reported cost increases cited higher import prices and tax adjustments, including the rise in VAT and fuel duties. Despite this, the report noted that price pressures remained subdued, helping firms sustain operations without passing significant costs to consumers.
Christopher Legilisho, Economist at Standard Bank, said improved consumer conditions and softer inflation had boosted private sector performance during the month.
“Kenya’s private sector in October saw both output and new orders up sharply as conditions improved for consumers and firms benefited from softer inflation,” he said. “Firms ramped up quantities purchased and increased inventory levels, expecting higher consumer demand. However, firms were less optimistic about future output conditions.”
Optimism moderates
Despite the improved activity, business confidence dipped slightly, with output expectations falling to a four-month low. About 20 percent of respondents expect activity to rise over the next year, while the rest maintained a neutral outlook.
Analysts say the optimism gap suggests that while firms are benefiting from the current momentum, uncertainty around costs, taxation, and consumer spending may be weighing on long-term sentiment.
Broad-based recovery
The Stanbic Bank Kenya PMI has now remained in expansion territory for two straight months following a period of contraction earlier in the year, largely attributed to political unrest and inflationary pressures.
With improving supply chain efficiency, milder cost increases, and firm domestic demand, economists expect the private sector to sustain its recovery in the short term.
“Low price pressures imply that, while output conditions have improved, they are not fuelling demand-driven inflation,” said Mr Legilisho.
The survey, conducted between October 9 and 29, covers about 400 private sector firms across agriculture, manufacturing, construction, wholesale, retail, and services.
