By Staff Reporter
Private sector activity in Kenya declined in March, marking the first contraction since August 2025, as businesses grapple with weakening demand and external pressures linked to instability in the Middle East.
Data from Stanbic Bank Kenya shows the Purchasing Managers’ Index (PMI) dropped to 47.7 in March from 50.4 in February. A reading below 50 signals a deterioration in business conditions, with March extending a four-month downward trend.
The survey, conducted between 12 and 27 March, points to reduced money circulation and strained household budgets, alongside rising fuel and transport costs. Ongoing logistical challenges have also disrupted supply chains, slowing delivery times and affecting overall productivity.
Businesses reported a decline in new orders for the first time in seven months, prompting firms to scale back output. At the same time, input costs surged at their fastest rate in over two years, driven by higher taxes, increased fuel prices, and rising shipping expenses. However, subdued demand and intensified competition have limited companies’ ability to pass these costs on to consumers.
In response, many firms are tightening operations by reducing inventory levels to preserve cash flow. Employment growth has also slowed, reaching its weakest pace since October 2025, while backlogs of work have declined sharply, recording the steepest drop in nearly six years.
Despite the downturn, business confidence remains cautiously optimistic. Slightly more than 20 percent of surveyed firms anticipate growth over the next 12 months, citing expansion strategies such as increased advertising, enhanced digital marketing, product diversification, and continued investment in capacity and workforce development.
