Kenya’s private sector economy stopped shrinking in June, snapping a run of three straight monthly contractions, according to the latest Stanbic Bank Kenya Purchasing Managers’ Index released Friday. The relief came at a cost: businesses raised their selling prices at the fastest pace ever recorded by the survey.
The headline PMI climbed to 50.0 in June, up from 46.6 in May. A reading above 50.0 signals improving business conditions from the previous month, while anything below points to deterioration. Landing exactly on the neutral mark tells its own story: Kenyan firms have stopped the bleeding, even if they haven’t yet found solid footing.
Fuel Costs Push Prices to a Record High
Rising fuel levies drove the sharpest jump in what businesses charge customers since the survey began compiling data in January 2014. About 41% of the roughly 400 companies surveyed said their input costs rose in June, against just 4% who saw costs fall, pushing overall cost inflation to its highest level in two and a half years. Construction firms felt this hardest, reporting the steepest cost pressures among the five sectors tracked.
That squeeze forced companies to pass costs on. Around 25% of firms raised their own prices in June, compared with only 2% who cut them, sending the survey’s output price index to its highest point on record.
Christopher Legilisho, an economist at Standard Bank, said the numbers point in two directions at once.
“The Stanbic PMI for June was upbeat on signs of a recovery after three months of weakness,” he said. “Firms’ new orders grew due to robust sales volumes. However, output conditions remained subdued on concerns of soft client demand and rising price pressures.”
New Orders Return, But Firms Can’t Keep Up
For the first time since February, new orders grew rather than shrank, though only modestly. Companies credited the uptick to customer referrals, marketing pushes, and business development efforts rather than any broader economic tailwind.
Output told a different story. Business activity fell for a fourth consecutive month, weighed down by thin client numbers, suppliers cutting capacity, and firms holding back on input purchases as cash flow tightened. The decline eased slightly from May, but Legilisho warned that the gap between rising orders and falling output points to a deeper problem. “The deterioration in backlogs and supplier delivery times suggests that supply side constraints are limiting firms’ ability to convert stronger orders into output,” he said.
That backlog told the story clearly. Unfinished work built up at its fastest pace since October 2019, as firms took in more orders than they could fill. Supplier delivery times stretched to their slowest since April 2020, with vendors holding back shipments until they could fill transport capacity, itself a symptom of rising fuel costs. Firms responded by building inventories anyway, Legilisho said, partly out of concern over shortages and partly because they now expect stronger demand ahead. Employment ticked up too, reversing a slight dip in May, as some companies added staff to handle the extra work piling up.
Businesses Grow More Confident About the Months Ahead
Despite the near term strain, Kenyan firms reported their strongest outlook on future activity in almost three and a half years. The survey’s Future Output Index climbed for a second straight month to its highest level since February 2023. About a third of businesses surveyed expect output to rise over the next year, while only 1% expect it to fall.
Companies pointed to plans for new market entry, heavier investment in advertising, and growing use of technology as reasons for their optimism. Some also said they expect fuel prices to ease, which would loosen the cost pressure that dominated June’s results.
Legilisho cautioned that the price shock now facing Kenyan businesses could outlast the one triggered by the 2022 oil crisis.
“Input and output prices accelerated sharply, reflecting higher fuel and raw material costs and a stronger pass through to consumers,” he said. “This has been keeping margin pressure elevated. Still, as international oil prices have been declining, there may be reprieve for firms in time.”
The Stanbic Bank Kenya PMI is compiled by S&P Global from responses gathered between 11 and 26 June 2026 across roughly 400 private sector companies spanning agriculture, mining, manufacturing, construction, wholesale, retail, and services.
