Kenya’s private sector activity expanded at its fastest rate in ten months in March, with the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) rising to 51.7 from 50.6 in February.
This was the highest reading since May 2024, indicating growth (readings above 50.0).
The improvement was driven by robust increases in output and new orders across most sectors, particularly services, wholesale, and retail. However, the manufacturing sector experienced a contraction in demand.
Economist Christopher Legilisho of Stanbic Bank noted the widespread expansion, contrasting it with the soft demand in manufacturing. The March 2025 PMI also showed a year-on-year increase of 4.0 points from 49.7 in March 2024.
“There were robust expansions in output and new orders across several sectors such as services, wholesale, and retail. Only the manufacturing sector exhibited soft demand,” said Christopher Legilisho, an economist at Stanbic Bank.
This modest improvement in the general business environment was supported by relatively low inflation (3.6% in March, within the Central Bank of Kenya’s target range for the 21st consecutive month), despite a slight increase from February’s 3.5% due to higher prices in food & non-alcoholic beverages and transport.
The Central Bank Rate (CBR) of 10.75% also contributed by reducing borrowing costs.
Increased sales led to higher input purchases and a slight build-up of raw material inventory. Average input charges saw a marginal increase due to slightly higher purchase prices and mild inflationary pressures, resulting in modest output price increases.
Sector data indicated output growth for the sixth consecutive month due to increased sales. However, some firms faced sales challenges due to inflation and customer cash flow issues, leading to some price reductions.
New orders also rose for the sixth month, attributed to more customers and higher demand, partly driven by increased marketing and favourable weather.
Employment numbers increased for the second consecutive month due to minimal capacity pressures, with a marginal rise in staffing costs. While most sectors experienced growth in output and sales, the manufacturing sector faced difficulties in production and new orders.
Kenya’s Q1 2025 average PMI stood at 50.9, a slight improvement from 50.3 in Q1 2024, primarily due to the easing of the monetary policy, which lowered borrowing costs and increased spending.
The finance ministry projects economic growth of 5.3% for 2025 and 2026, up from an estimated 4.6% last year.
