Kenya’s private sector momentum took a hit in May, as the Purchasing Managers’ Index™ (PMI) slipped into negative territory, ending a seven-month streak of improving business conditions.
The PMI, a key indicator of private sector performance, fell from 52.0 in April to 49.6, signalling a mild contraction in overall economic activity.
The decline was driven by rising input prices, which dampened customer demand and weighed on business output.
This marks the first sub-50 reading since September 2024, highlighting growing pressures in the economic environment.
“Input prices rose at their fastest pace in four months,” the report noted, pointing to higher purchase costs and increased tax burdens. While cost pressures remain below historical averages, they were significant enough to curb consumer spending.
In response, businesses attempted to absorb costs, with output price inflation easing to its lowest rate since October. However, overall output still declined at the fastest rate in 10 months, particularly in the construction, retail, and services sectors. In contrast, agriculture and manufacturing showed modest growth.
Key Sector Insights:
- Customer orders dropped for the first time in eight months.
- 33% of firms reported lower output, compared to 29% noting an increase.
- Stock levels continued to grow for the fifth month, but at the slowest pace since February.
- Employment ticked up slightly, mostly through short-term hires to complete pending orders.
- Suppliers maintained timely deliveries, with lead times shortening marginally for the fourth consecutive month.
Despite pockets of resilience, business sentiment remains bleak. Only 4% of firms expressed optimism about the year ahead—the second-lowest confidence level on record.
Hopes are pinned on branch expansions and marketing efforts, but many firms appear cautious amid sustained economic headwinds.
