Kenya’s private sector returned to growth in September. The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) rose to 51.3 from 49.7 in August, back above the 50.0 line that separates expansion from contraction.
The reading matches July and is the highest since January, according to the survey compiled by S&P Global and released on October 5.
Output still fell for a seventh month. Customer demand lifted the index, not production.
Orders, jobs and purchasing recover
New orders rose for a fourth straight month, and the pace picked up from August. Firms credited market demand, customer referrals, marketing campaigns and cash injections.
Employment grew again, at a slightly slower rate than before but above the survey average. Outstanding work increased for a fourth month, and firms linked hiring to rising workloads.
Purchasing activity grew after four months of decline, and input stocks rose for the first time since June. Suppliers delivered faster for a second month, though firms said material shortages limited the gain.
Output stays below the 50 line
The Output Index reached its highest level in seven months and remained just under 50.0. Agriculture and wholesale and retail cut activity. Manufacturing, construction and services expanded. Firms blamed inflation and shortages of agricultural goods for lower output.
Christopher Legilisho, economist at Stanbic Bank, described the result as a “demand-led improvement in private sector conditions rather than a broad-based recovery in activity.” He said higher fuel, transport and farm input costs, together with material shortages, limited the ability of firms to turn sales into production.
Costs and selling prices climb
About 30% of firms reported higher input costs in September, against 1% that reported a fall. Panellists named fuel, transport and agricultural products. One in five firms raised selling prices, against 2% that cut them. Output price inflation was the second fastest since November 2023, behind only June 2026. Wage costs rose again, easing from August’s seven and a half year high.
Official data shows the same pressure. Annual inflation rose to 6.8% in September from 6.6% in August. Food inflation reached 9.5% and transport inflation 15.6%, and the month was the sixth in a row above the 5% midpoint of the central bank’s target range. Core inflation rose to 4% from 3.4%.
The PMI since November
| Month | PMI |
|---|---|
| November 2025 | 55.0 |
| December 2025 | 53.7 |
| January | 51.9 |
| February | 50.4 |
| March | 47.7 |
| April | 49.4 |
| May | 46.6 |
| June | 50.0 |
| July | 51.3 |
| August | 49.7 |
| September | 51.3 |
The index peaked at 55.0 in November 2025, its highest in more than five years. It fell to 51.9 in January from 53.7 in December, a four month low. Khusoko covered the January slowdown and reported the 50.4 reading for February, a third straight decline.
March brought the first reading below 50.0 since August 2025, at 47.7. Household budgets, higher fuel costs and the Middle East war pulled the index down. April rose to 49.4 and stayed in contraction for a second month. Output and new orders fell at slower rates than in March. Input cost inflation reached its highest level since December 2023, and firms passed more of it to customers than they had in March. Staff numbers rose for a 15th straight month.
May fell to 46.6, the steepest decline since July 2024, with the first drop in employment since the start of 2025. June returned to 50.0. July was the first reading above 50.0 since February, at 51.3. August slipped to 49.7 as supply constraints and cost pressures led firms to cut output and purchases. September recovered to 51.3. The index has crossed the 50.0 line four times since January, so one reading does not set a trend.
What the trend means for readers
The PMI tracks the direction of change from one month to the next. It does not report a level of output. A reading of 51.3 means more firms reported improvement than deterioration compared with August.
Fuel. Nairobi pump prices for March 15 to April 14 stood at KSh178.28 for petrol and KSh166.54 for diesel. EPRA raised prices for April 15 to May 14 after the February 28 strikes on Iran disrupted Strait of Hormuz shipping. Khusoko reported diesel at KShs 242.92 per litre for May 15 to June 14. The ceilings for September 15 to October 14 are KSh214.03 for petrol and KSh217.86 for diesel. Against March, petrol costs about 20% more and diesel about 31% more.
Government support kept prices from rising further. The Treasury extended a VAT cut on petroleum products, to 8% from 16%, for three months through mid October. Khusoko reported the extension in July, and its August coverage tracked how the intervention held prices flat. The average landed cost of diesel rose 11.86% in the latest cycle, while petrol import costs fell by nearly 8%.
Household prices. Inflation stood at 4.4% in March. It reached 6.8% in September. A 500 ml pack of UHT milk rose from KSh57.08 to KSh61.64 in a month. The PMI shows the pass through: firms report higher fuel, transport and farm input costs, and one in five raised selling prices in September.
Jobs and pay. Firms added staff for a fourth month in September, and respondents reported pay increases linked to the cost of living. Hiring has resumed since the May fall, but prices are rising at 6.8% a year, which limits what pay gains buy.
Loans. The Central Bank of Kenya cut its benchmark rate to 8.75% in February. It held the rate for a third straight sitting on August 11. Average commercial bank lending rates were 14.7% in March. Inflation near the top of the target range gives the committee less room to cut.
What to watch
EPRA publishes the next fuel prices on October 14, when the VAT relief reaches its end date. The Output Index needs to cross 50.0 for demand to turn into production. The next inflation release from the Kenya National Bureau of Statistics will show whether firms keep passing on costs.
Business expectations slipped to a four month low in September. About 31% of firms forecast higher activity over the next 12 months and the rest expected no change. Legilisho said a sustained expansion depends on lower cost pressures and better input availability. Otherwise, he said, growth may stay modest and push prices up.
