NAIROBI,Kenya,June 4– Kenya’s private sector contracted further in May as rising costs, weakening demand and shrinking new orders dragged business conditions to their lowest level in nearly a year, according to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI).
The headline PMI fell to 46.6 in May from 49.4 in April, signalling a sharper deterioration in operating conditions and marking the fastest decline in private sector health since July 2024.
The downturn was broad-based, with services and construction recording the steepest declines in output and new work, while manufacturing offered the only pocket of growth.
Firms reported that higher cost burdens and tighter customer budgets weighed heavily on demand, with new orders falling at the fastest pace since mid-2025.
The drop in sales triggered a rare pullback in hiring, with employment contracting for the first time since the start of 2025 as firms reduced temporary staffing and relied on existing capacity.
Input costs accelerated sharply during the month, with purchase price inflation rising at its fastest pace since November 2023.
Output prices also increased at the quickest rate in two-and-a-half years as companies passed on part of the rising cost pressures to customers.
Despite the downturn, firms maintained some stability in operations, with inventories broadly unchanged and supply chains showing marginal improvement.
However, input buying contracted as firms scaled back stockpiling amid cash flow constraints.
“The Stanbic Bank PMI data for May reflects a deterioration of business activity by private sector firms,”siad Standard Bank economist Christopher Legilisho.
“Inflationary pressures have intensified, constraining demand conditions, with input prices, purchase costs and output prices driven up by higher fuel and transportation costs.”
Even so, business sentiment for the year ahead improved, with firms citing planned investment in digital expansion, advertising, and product diversification as key drivers of expected recovery in activity.
The PMI survey suggests that while cost pressures remain a major drag on demand, firms are cautiously optimistic that activity could stabilise in the coming months if inflationary pressures ease and demand conditions recover.
