NAIROBI, June 4 – Kenya’s private sector remained under pressure in May, recording a third consecutive month of contraction as higher costs and weaker consumer demand weighed on business activity across much of the economy.
According to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI), the headline reading fell to 46.6 in May from 49.4 in April, marking the sharpest deterioration in business conditions since July 2024.
A PMI reading below 50 indicates a decline in private-sector activity, while a figure above that threshold signals expansion.
Annual inflation accelerated to 6.7% in May, up from 5.6% in April, reaching its highest level in more than two years. Higher fuel prices, driven by increased global energy costs, were among the primary contributors to the increase.
Businesses surveyed pointed to slowing demand, elevated inflation and a shortage of new orders as key factors behind the weaker performance during the month.
Most sectors experienced softer conditions, although manufacturing stood out as the only major segment to record growth, providing a rare bright spot in an otherwise challenging business environment.
The decline coincided with a rise in inflationary pressures across the Kenyan economy.
Rising transportation and energy expenses pushed up operating costs for businesses, which in turn led to higher prices for consumers and further constrained spending.
Companies also reported increases in input costs, purchasing expenses and selling prices, highlighting the broad impact of inflation on business operations.
Despite the difficult trading environment, firms maintained a positive outlook regarding future economic conditions.
Businesses expressed confidence that demand could improve in the months ahead, supported by expectations of stronger economic activity and more stable operating conditions.
Kenya’s economy is still projected to expand this year, with government forecasts pointing to growth of approximately 4.9% in 2026 compared with 4.6% recorded in the previous year.
However, the latest PMI figures suggest that inflationary pressures and rising living costs remain significant challenges for businesses and households in the near term.
The data underscores the delicate balance facing policymakers as they seek to support economic growth while managing the impact of higher prices on consumer demand and business confidence.
