Kenya’s private sector contracted for a second straight month in April, squeezed by a sharp rise in fuel prices that eroded margins and kept consumers from spending, a closely watched business survey revealed Wednesday.
The Stanbic Bank Kenya Purchasing Managers’ Index climbed to 49.4 in April from 47.7 in March, yet stayed below the 50.0 threshold that separates growth from contraction. March had marked the first sub-50 reading since August 2025.
Fuel costs drive demand lower across key sectors
The primary culprit was energy prices. In mid-April, Kenya raised retail fuel prices by up to 24.2% following a spike in crude costs and tighter petroleum supplies triggered by the Middle East conflict. Businesses felt the squeeze almost immediately.
“Businesses in Kenya suffered a further decline in operating conditions in April, as increasing fuel prices lifted average cost burdens and dampened customer demand,” Stanbic Bank said in its survey commentary.
The pain spread unevenly but widely. Output fell most sharply in wholesale and retail trade, agriculture and services. Christopher Legilisho, economist at Stanbic Bank, said that “concerns about rising costs, tied to higher transport costs, and the ability to secure supplies, especially from the Middle East and Asia, weighed on output and new orders.”
Input prices reach a two-year high
Price pressures accelerated at a pace not seen since December 2023. Around 18% of survey respondents reported higher input costs during the month, against just 1% who recorded a decline. Firms mostly attributed the rise to elevated fuel costs, increased shipping charges and higher prices for items in short supply. Those additional costs fed directly into selling prices, with output charges rising at the fastest rate in nearly two and a half years.
Firms stock up to guard against shortages
Rather than cut purchasing, many businesses moved to protect themselves. After inventory levels fell in March, stock building returned in April, rising to the greatest extent recorded so far in 2026. Companies escalated their stocking efforts in anticipation of further price rises and potential shortages.
That caution extended to sentiment. Business confidence slipped for a third consecutive month, though it remained net positive. Around 18% of survey panellists still forecast output growth over the next 12 months, pointing to expansion plans, product diversification and marketing investment as their reasons for optimism.
Employment holds steady despite the slowdown
One area of relative resilience was the jobs market. Staff numbers grew for a fifteenth consecutive month, with firms predominantly bringing on casual workers to support ongoing projects and business expansion. Wage costs, however, barely moved, edging only fractionally higher from March and remaining broadly flat — a pattern consistent with subdued pay growth across the private sector in recent months.
Broader economy faces an uncertain outlook
The PMI data arrives as Kenya’s statistical agency projected 4.9% economic growth for 2026, while flagging that Sub-Saharan Africa remains highly exposed to shocks from the US-Israeli conflict with Iran. The economy expanded 4.6% last year, little changed from 4.7% in 2024 and below the finance ministry’s 5.0% forecast for that year. Annual inflation rose to 5.6% in April from 4.4% in March, according to official data.
The trajectory for the months ahead hinges on whether fuel costs stabilise. Until they do, the combination of tighter margins and cautious consumers will continue to weigh on an economy with considerably more to offer once those external pressures ease.
