Business conditions in Kenya’s private sector showed a marked improvement in August, with the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) climbing to 49.4 from a 12-month low of 46.8 in July. Although still below the neutral 50.0 mark, the latest reading indicates a softer contraction and signals that the economy is edging closer to recovery after months of weak sales and protest-related disruptions.
The survey, compiled by S&P Global, found that declines in output, new orders and purchasing activity eased significantly during the month, while employment rose at the fastest pace in 15 months. Companies also reported a renewed build-up of inventories, supported by greater optimism about future business prospects.
“Kenya’s private sector is showing resilience as demand stabilises and firms regain confidence,” said Christopher Legilisho, Economist at Standard Bank. “The August data suggests that new marketing efforts, product diversification and an improving economic environment are helping to restore momentum.”
New orders fell for the fourth consecutive month, but at the slowest rate in that period. Some firms cited subdued client purchasing power, while others noted signs of recovery as economic activity picked up. Improved demand expectations encouraged businesses to restart procurement, resulting in a slight increase in stocks after July’s decline.
Job creation also strengthened, helping firms reduce backlogs for the third month running. Supply chain conditions improved sharply, with delivery times shortening at the fastest pace since October 2021 amid heightened competition among vendors.
Cost pressures, however, remained a challenge. Companies recorded a solid rise in input costs, driven in part by higher taxes on items such as fuel. Wage pressures also intensified, though the overall pace of inflation eased for the first time in five months. To stimulate demand, firms kept output charges largely steady, raising them at the slowest rate in a year.
Business sentiment was another bright spot, with confidence about future output reaching its highest level in two and a half years. Many firms expressed faith that marketing initiatives and diversified product offerings would bolster sales in the coming months.
The Stanbic Bank Kenya PMI is a monthly survey of around 400 private sector firms across agriculture, manufacturing, construction, wholesale, retail and services. A reading above 50.0 signals an improvement in operating conditions, while one below reflects a deterioration.