Kenya’s private sector activity grew at the slowest pace in four months in January, weighed down by higher prices of raw materials as well as elevated import taxes, new findings of a monthly survey indicate.
The Stanbic Kenya Purchasing Managers Index (PMI) —a gauge for monthly private sector activity such as output, new orders, and employment— slowed to 51.9 last month, down from 53.7 in December last year.
A reading above 50 signals expansion activity, while a reading below denotes a contraction.
“For the fifth month in a row, the headline PMI was above the 50.0 mark, signalling an upturn in business conditions. However, the improvement was less pronounced compared to those seen at the end of last year, shown by the index falling from 53.7 in December to 51.9 in January,” Stanbic said.
“Kenyan firms reported a solid increase in operating expenses in January. Prices for raw materials were often quoted as rising, whilst higher tax charges, import fees, and technology costs were also noted.”
Despite the slowdown, the report shows that employment growth within the private sector was sustained during the month, marking the 12th successive month of jobs growth and the longest phase of expansion established by the survey since 2019.
According to the monthly release, firms mentioned hiring casual workers due to an increase in workloads, amid signs that a slowdown in new business growth had tempered these efforts.
An increase in output across private businesses was observed for the fifth straight month, albeit the rate of growth decelerated further from last November’s multi-year high.
The survey noted that the output gains were linked to stronger customer referrals, marketing, and improved credit access.
Companies also registered an upturn in their new orders as 2026 commenced, stretching the run of growth that kicked off last September.
Like output, however, the rate of increase softened to the weakest in four months.
“New orders were often supported by stronger client outreach, improved referrals, firms’ competitiveness and shifts to digitisation, according to respondents,” noted Stanbic.
The PMI report, based on feedback from about 400 panelists drawn from agriculture, manufacturing, construction, wholesale and retail, and services, shows that enhanced competition in January made firms restrain price increases, with headline inflation easing to 4.4 percent, down from 4.5 percent in December.
“Higher input prices, purchase costs, staff costs, and output were likely due to higher taxes and rising technology costs. That said, increased competition made firms restrain price increases, as corroborated by headline inflation in January easing to 4.4 percent year-on-year,” Christopher Legilisho, chief economist for South African-based Standard Bank, the parent firm of Stanbic Bank, said in the January PMI report.
Kenya’s headline inflation has remained below five percent since mid-2025, supported by a stable shilling and easing imported inflation, particularly for fuel and manufactured goods.
The majority of firms surveyed in the PMI do not expect to expand businesses in the next 12 months, with only 22 percent of surveyed firms expressing positive expectations, as the remainder stayed neutral.
The strongest optimism was seen in the manufacturing and construction segments.
