Kenya’s private sector came close to stagnation in February as business growth slowed to its weakest level in six months, according to the latest data from the Stanbic Bank Kenya PMI compiled by S&P Global.
The Purchasing Managers’ Index (PMI) fell for the third consecutive month to 50.4 in February, down from 51.9 in January, edging closer to the 50.0 neutral mark that separates expansion from contraction. While the reading still signals marginal improvement in business conditions, it reflects a marked cooling in momentum across the private sector.
Output Nearly Stalls
Business activity growth was almost at a standstill during the month. About 33 per cent of surveyed firms reported higher output, compared to 32 per cent that recorded declines, highlighting the fragile balance in operating conditions.
The slowdown was attributed to softer new order growth and continued pressure from macroeconomic challenges. Although total sales volumes rose, the pace of expansion was the weakest in the current six-month growth sequence.
Firms cited product innovation, expanded marketing efforts and price promotions as supportive of sales. However, others pointed to difficult economic conditions, reduced consumer purchasing power and intense competition as key constraints.
Sector performance was mixed. Construction, wholesale and retail, and services recorded growth in sales, while agriculture and manufacturing experienced downturns.
New Orders and Purchasing Activity Weaken
New business growth eased to its slowest rate in six months, prompting companies to scale back purchasing activity. Inventory accumulation also rose at the slowest pace in seven months.
Supplier delivery times continued to improve, though at a softer rate than in January, amid reports of vendor congestion, road traffic and port delays.
Despite the slowdown, firms indicated that workloads remained elevated. Backlogs of work were broadly unchanged after eight months of decline, helping to sustain employment growth as businesses hired additional staff to manage pressure.
Inflationary Pressures Ease
Encouragingly, overall input cost inflation slowed to a three-month low. Both purchase prices and staff wages rose at more moderate rates, though businesses continued to cite higher material costs and the impact of increased VAT.
With cost pressures easing and market competition intensifying, firms raised output prices at the slowest pace since November, often resorting to discounts to maintain customer demand.
Cautious Optimism Ahead
Christopher Legilisho, Economist at Standard Bank, said the February data reflected modest growth amid lingering economic strain.
“The Stanbic Kenya PMI cooled in February as firms reported only modest surges in new orders and steady output. While the outcome was still expansionary, some businesses were hampered by increased competition and a doubtful economy,” he said.
Legilisho noted that although macroeconomic conditions have improved, segments of the private sector are yet to fully feel the benefits.
However, sentiment about the year ahead remained relatively upbeat. Just over a fifth of surveyed firms expect output to rise over the next 12 months, driven by hopes of stronger demand, improved economic conditions, product innovation and expanded marketing efforts. Business optimism was significantly higher than the average recorded in 2025.
The survey, conducted between February 10 and 25, covers around 400 private sector companies across agriculture, mining, manufacturing, construction, wholesale, retail and services.
The latest reading suggests Kenya’s economy remains in expansion territory, but only marginally, as businesses navigate subdued demand, competitive pressures and lingering cost concerns.