Kenya’s private sector economy suffered its sharpest contraction in a year during July, as reflected in the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI®). The index fell for the third consecutive month, highlighting mounting pressure from political unrest, high inflation, and subdued consumer demand.
“Business activity fell at the strongest pace in a year in July, with 38% of survey respondents signalling a downturn over the month (versus 17% that saw a rise),” Stanbic said in a statement.
The PMI dropped from 48.6 in June to 48.0 in July, remaining below the crucial 50.0 threshold that separates growth from contraction. This marks the lowest reading since July 2024, driven by steep declines in output and new business orders, both of which fell at the fastest pace in 12 months.
“The Stanbic Kenya PMI suggests that private sector output and new orders weakened for a third month in a row, reflecting the negative impact recent events have had on businesses,” said Christopher Legilisho, Economist at Standard Bank.
The report attributed the slowdown to weaker client demand, rising price pressures, and disruptions caused by recent political protests. This combination of factors led to reduced purchasing volumes and inventory levels, particularly in manufacturing, services, and wholesale sectors.
Legilisho noted that while some improvements were seen in agriculture and construction, the overall downturn was broad-based. He added that the private sector’s purchasing activity fell at the sharpest rate since April 2021.
Moreover, July’s figures revealed an increase in input prices and backlogs of work, reflecting bottlenecks in business operations. Firms faced cost pressures from rising fuel prices, tax payments, and higher import costs. The Energy and Petroleum Regulatory Authority’s recent fuel price adjustments added further strain, the report noted.
As costs rose, businesses passed on the burden to consumers, leading to the steepest increase in selling prices since January. However, demand remained subdued, forcing some firms to scale back operations and reduce stock levels. The resulting buildup in backlogs caused by smaller workforce deployment and weaker sales was the sharpest in over four years.
The Stanbic Bank PMI report indicated that firms were reluctant to increase staffing despite stable employment levels overall. Only a few businesses attempted to raise their workforces in July, suggesting continued caution amid economic uncertainty.
Stocks of purchases also fell sharply as companies cut back on procurement. According to the report, the reduction in purchasing activity marked the most significant drop in 2025 so far.
Despite the downbeat data, optimism for future activity improved in July. The degree of positive sentiment reached its highest level in 15 months, with several businesses hopeful about new product launches, expanding branch operations, and recovering demand in the second half of the year.
“Although pressures increased, the private sector outlook was somewhat positive as some sectors planned for expansion,” the report noted.
Yet the contrast between optimistic expectations and deteriorating present conditions reflects the uneven recovery path Kenya’s economy continues to tread. While some businesses prepare for growth, others are still navigating the weight of weak consumer spending and cost burdens.
The Stanbic Bank PMI survey, conducted by S&P Global, showed diverging performance across sectors. Wholesale, retail, and service industries continued to struggle, while agriculture and construction sectors showed modest resilience.
The key takeaway from the report is the stark divide between short-term struggles and long-term business expectations. While confidence appears to be rebuilding, current operating conditions remain fragile.
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