Kenya’s private sector expanded in July for the first time since February, as businesses pulled in new orders at the fastest pace since January and hired staff at a rate not seen since early 2023.
The Stanbic Bank Kenya Purchasing Managers’ Index rose to 51.3 in July from 50.0 in June, according to the survey compiled by S&P Global. Any reading above 50 signals growth, so the move marks a real turning point after four months in which activity either stagnated or shrank outright.
What lifted the index
Stronger demand did most of the heavy lifting. Businesses reported the strongest increase in new orders since January, driven largely by referrals and marketing efforts that pulled in fresh customers. Employment climbed at its fastest rate since February 2023, as firms hired to keep pace with the swell in orders and worked through backlogs that had built up over the previous three months.
Christopher Legilisho, economist at Stanbic Bank, said the July reading shows demand starting to recover, though he cautioned that cost pressures and logistics bottlenecks are still holding activity back. Output actually fell for a fifth straight month even as new orders climbed, a mismatch Legilisho linked to persistent supply chain disruptions and delays in receiving imported components. Firms drew down existing stock to bridge the gap rather than restocking, a sign they expect demand to keep firming up.
Six months of ups and downs
July’s rebound continues a volatile run for Kenya’s private sector. The index fell to 46.6 in May, its steepest one month drop since July 2024, before recovering to a neutral 50.0 in June and then pushing further into growth territory in July. That swing from a near two year low to the strongest reading in months illustrates how sensitive Kenyan businesses remain to shifts in fuel costs, currency movements and consumer demand.
| Month | PMI reading | Signal |
|---|---|---|
| April 2026 | 49.4 | Contraction |
| May 2026 | 46.6 | Sharpest fall since July 2024 |
| June 2026 | 50.0 | Stabilisation, growth resumes |
| July 2026 | 51.3 | Fastest new orders since January |
Costs stay high, but pricing pressure eases
Input cost inflation remained elevated in July, cooling only marginally from June’s 31 month peak. More than a third of surveyed companies, 37 percent, reported higher operating expenses, driven by rising transport costs, elevated fuel prices and material shortages tied to instability in the Middle East. Selling price inflation told a different story, slowing to its softest pace since April as only 15 percent of firms raised their charges, a sign that competition in a price sensitive market is limiting how much of that cost businesses can pass on to customers.
Kenya’s headline inflation rate ticked up slightly to 6.5 percent year on year in July from 6.4 percent in June, according to the statistics office, tracking closely with the cost pressures firms reported in the PMI survey.
Businesses grow more confident about what comes next
Supplier performance worsened for a second straight month, with delivery times lengthening as shortages and rising costs prompted mixed responses from firms. Some businesses built up inventory to buffer against further shortages, while others cut back on purchasing and trimmed stock instead.
Despite those operational headwinds, confidence about the future jumped to its highest level in nearly three and a half years, since early 2023. Firms pointed to demand projections, business diversification plans, product innovation and supply chain optimisation efforts as reasons for the improved outlook. Kenya’s finance ministry has echoed that optimism at the macro level, forecasting economic growth of 5.1 percent in 2027 and 5.2 percent in 2028, up from an estimated 5.0 percent this year.
The bigger picture
July’s PMI reading offers the clearest signal yet that Kenyan businesses are shaking off a rough start to the year, even if the recovery remains uneven. New orders and hiring point to genuine momentum building beneath the surface, but a fifth consecutive month of falling output shows firms still cannot convert that demand into production fast enough.
Whether August brings a breakthrough on supply constraints, or another month of firms drawing down stock to meet orders they cannot yet produce, will say a lot about how durable this recovery turns out to be.
