Activity in Kenya’s private sector slowed to its weakest pace in four months in January, dragged down by higher raw material prices and elevated import taxes, according to a new survey.
The Stanbic Kenya Purchasing Managers Index, which tracks monthly movements in output, new orders and employment, eased to 51.9 in January from 53.7 in December. Readings above 50 indicate expansion, while those below signal contraction.
Stanbic said business conditions continued to improve for a fifth consecutive month, though the pace of growth lost steam compared to the end of last year. The lender noted that firms reported a marked rise in operating costs, driven largely by more expensive raw materials, alongside higher tax charges, import fees and technology-related expenses.
Even so, employment growth held firm, extending a run of job creation to 12 straight months. This marks the longest uninterrupted stretch of private-sector employment expansion recorded by the survey since 2019. Companies cited the hiring of casual workers to cope with heavier workloads, although softer growth in new business limited the scale of recruitment. Output also rose for a fifth month in a row, but the rate of increase slowed further from the multi-year high seen in November. Gains were attributed to stronger referrals, increased marketing activity and improved access to credit.
New orders continued to rise at the start of 2026, prolonging an expansionary trend that began last September. However, as with output, growth in new business eased to a four-month low. Firms linked incoming orders to stronger client engagement, better referrals, improved competitiveness and a growing shift towards digital operations.
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The PMI survey, which draws on responses from about 400 firms across agriculture, manufacturing, construction, wholesale and retail, and services, also pointed to heightened competition in January. This competitive pressure constrained price increases, helping to ease headline inflation to 4.4 percent from 4.5 percent in December.
Stanbic’s chief economist said higher input, purchasing and staff costs were largely the result of increased taxes and rising technology expenses. However, intensified competition limited firms’ ability to pass these costs on, a trend reflected in the moderation of inflation.
Kenya’s headline inflation has stayed below five percent since mid-2025, supported by a stable shilling and easing imported inflation, particularly for fuel and manufactured goods. Looking ahead, most firms remain cautious, with only 22 percent expecting to expand over the next year. Optimism was strongest in manufacturing and construction, while the majority of respondents adopted a wait-and-see stance.
