NAIROBI, Kenya – Kenya private sector activity contracted for the third consecutive month in May, highlighting growing pressure on businesses as weak consumer demand, rising fuel prices, and inflation weighed heavily on economic performance.
According to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI), the country’s private sector recorded a reading of 46.6 in May, down from 49.4 in April. A PMI reading below 50 indicates a contraction in business activity, while a reading above 50 signals growth. The latest figure marks the sharpest decline in Kenya’s private sector activity since July 2024.
Analysts attribute the slowdown in Kenya private sector activity to a combination of reduced customer spending, increasing operational costs, and fewer new business orders. Businesses surveyed reported that households and consumers remained cautious with spending amid rising living costs and economic uncertainty.
The survey found that inflationary pressures intensified during the month, driven largely by higher fuel prices that pushed up transportation and production costs across multiple sectors of the economy. As a result, many firms passed part of the increased costs on to consumers, further dampening demand.
Despite the broader downturn, the manufacturing sector emerged as a rare bright spot. Manufacturing was the only major sector to record growth in May, supported by resilient production levels and relatively stable demand compared to other industries.
In contrast, businesses operating in services, retail, construction, and wholesale trade continued to face difficult conditions as customers scaled back spending and delayed purchases. Industry players noted that the combination of higher prices and reduced purchasing power has made it increasingly difficult to maintain sales volumes.
Economists say the continued decline in Kenya private sector activity reflects broader economic challenges facing businesses and households alike. Rising fuel costs have triggered increases in transportation expenses, which have subsequently affected supply chains and the prices of goods and services across the country.
Data from the Kenya National Bureau of Statistics showed inflation rose to 6.7 percent in May from 5.6 percent in April, adding further pressure on consumers already grappling with a high cost of living. The increase in inflation has coincided with higher energy prices, creating a difficult operating environment for businesses.
However, despite the current challenges, business confidence remains cautiously optimistic. Many firms expect conditions to improve over the coming year, driven by anticipated economic recovery, investment opportunities, and stronger consumer demand. Economists also project that Kenya’s economy could grow by 4.9 percent in 2026, slightly higher than the 4.6 percent growth recorded in 2025.
The latest PMI figures suggest that while Kenya’s economy continues to expand overall, the private sector remains under considerable strain. Policymakers will be closely monitoring inflation trends, fuel prices, and consumer spending patterns in the coming months as they seek to support business growth and stabilize Kenya private sector activity.