Kenya’s private sector recorded its strongest expansion since December 2021, with the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) climbing to 52.5 in October, up from 51.9 in September.
This marks the second consecutive month of growth and the highest reading since February 2022.
“Output growth across Kenya’s private sector accelerated to its fastest pace in nearly four years,” Stanbic Bank noted.
Key Drivers of Growth
- Improved Economic Environment: Firms cited stronger demand and a more stable macroeconomic backdrop.
- Sales Uptick: Businesses reported higher new orders, driven by promotional pricing and new product launches.
- Purchasing Activity: Increased for the first time since April, reflecting renewed confidence.
- Input Costs: Rose at the slowest pace in over a year, easing inflationary pressure.
- Sector-Wide Expansion: All five monitored sectors recorded growth, with wholesale and retail leading the charge.
Discounts, Demand, and Inventory Rebuild
Retailers and wholesalers reported a noticeable uptick in activity, with many offering discounts to stimulate sales. As demand rebounded, firms ramped up procurement and rebuilt input inventories, supported by shorter delivery times and improved vendor competition.
“Pricing indicators were soft in October… low price pressures imply that, while output conditions have improved, they are not fueling demand-driven inflation,” said Christopher Legilisho, economist at Standard Bank.
Supply Chains and Employment Trends
- Lead Times: Shortened for the ninth straight month, thanks to subdued input demand and competitive suppliers.
- Employment: Largely stable, with only marginal job creation.
- Backlogs: Declined as firms cleared outstanding orders.
Outlook: Optimism Tempered by Uncertainty
Despite the strong October performance, output expectations dipped to a four-month low, with only 20% of firms anticipating growth by October 2026. The rest maintained a neutral stance, citing concerns over taxes, import costs, and policy uncertainty.
Inflation and Fiscal Outlook
- Input and Wage Costs: Rose modestly, contributing to the lowest inflation rate in 13 months.
- Tax Pressures: Firms flagged rising VAT and fuel duties as key cost drivers.
- Government Forecast: Kenya’s Treasury projects GDP growth of 5.3% in 2025 and 2026, up from 4.7% in 2024.
