NAIROBI, Kenya, June 5 – Kenya’s private sector faced a mild slowdown in May, marking the end of seven months of steady growth, as persistent inflationary pressures and rising input costs led to reduced consumer purchasing and a dip in overall demand.
This is according to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI), which provides a snapshot of business performance across key sectors of the economy.
The headline PMI reading dropped to 49.6 in May, down from 52.0 in April, and fell below the critical 50.0 threshold, which separates growth from contraction.
This is the first time since September 2024 that the index has signaled a downturn in business activity.
The decline was primarily driven by a reduction in new orders, ending a consistent upward trend that had lasted for over half a year.
This softening in demand had a ripple effect across the economy, with the report noting that overall output levels declined at their sharpest pace in ten months.
Key sectors such as construction, retail, and services bore the brunt of the downturn. In contrast, agriculture and manufacturing showed signs of resilience, registering marginal improvements.
“The Stanbic Kenya PMI signaled fragility in the private sector’s recovery,” noted Christopher Legilisho, economist at Standard Bank.
“There was a moderate contraction in output, and a decline in new orders after seven months of expansion.”
Despite these challenges, supply chains saw slight improvements, with delivery times for inputs improving marginally.
This suggests fewer disruptions and possibly more efficient logistics networks.
However, cost pressures continued to rise, with input prices increasing at their fastest rate since January, driven by elevated fuel, transport, and raw material costs.
Fortunately, businesses passed on only part of these costs to consumers, leading to a slight easing of inflation on output prices.
The forward-looking aspect of the PMI painted a cautious picture; only 4 percent of firms surveyed expressed optimism about output growth over the coming year, making it one of the weakest levels of business confidence recorded since the index was launched in Kenya.
Most firms linked their hopes to planned branch expansions and renewed marketing efforts, rather than organic demand recovery.
