Kenya’s Private Sector Contracts as Cost Pressures Intensify

Kenya’s private sector came under renewed pressure in March, as the Stanbic Bank Kenya Purchasing Managers’ Index fell to 47.7 from 50.4 in February, marking a fourth straight monthly decline and signaling a deterioration in business conditions.

The slowdown reflects a tightening economic environment, with reduced money circulation, declining household purchasing power, and rising fuel and transport costs. These factors, compounded by logistical disruptions, have weakened supply chains and slowed overall commercial activity.

For the first time in seven months, businesses reported shrinking order books, leading to scaled-back production. Meanwhile, input costs surged at their fastest pace in more than two years, driven by higher taxes, increased fuel prices, and elevated shipping costs. However, subdued demand and intensified competition have limited firms’ ability to pass these costs on to consumers, putting pressure on profit margins.

To navigate the downturn, companies are adopting more conservative financial strategies, including reducing inventories and slowing hiring. Employment growth has nearly stalled, reaching its lowest level since October 2025, while backlogs of work have declined sharply, indicating reduced operational strain.

Despite current challenges, business sentiment remains relatively stable. Over one-fifth of firms expect growth over the next 12 months, supported by expansion plans, stronger marketing initiatives, product diversification, and continued investment in capacity and talent.

Source: Newstimehub