Kenya’s private sector closed 2025 on a strong footing, with the Stanbic Bank Kenya Purchasing Managers’ Index (PMI®) posting 53.7 in December, signalling robust expansion in business conditions.
The reading, alongside November’s 55.0, marked the highest PMI levels in four years, underscoring resilience in demand, employment, and purchasing activity despite rising cost pressures.
PMI Momentum
Business output rose sharply in December, supported by stronger order books, improved tourism, and promotional pricing. Firms reported higher sales volumes, citing “advertising, affordable prices, better cash flow, and increased travel” as key drivers.
Employment growth was particularly notable, with staffing levels expanding at the fastest pace since November 2019. Construction firms led the surge, reflecting government efforts to stimulate activity. Backlogs of work fell for the seventh consecutive month, the longest decline streak in over a decade.
Purchasing activity also accelerated, with firms building inventories and benefiting from improved supply chain efficiency. Delivery times shortened to their best levels since 2021, as vendors competed to win business.
Inflationary Pressures
Input costs rose at the quickest pace in four months, reversing November’s 18‑month low. Taxes, fuel, and materials were the main contributors, while wage inflation remained subdued. Output prices climbed modestly, particularly in manufacturing and construction.
Economist Christopher Legilisho of Standard Bank noted:
“The PMI stayed in expansion territory, implying still strong demand conditions are driving new orders, in turn lifting output in the private sector at the end of the year. Firms increased input purchases and inventories to maintain competitiveness. However, rising input and output prices suggest inflation could pick up in the coming months.”
GDP Context
The PMI findings align with broader economic trends. According to the Kenya National Bureau of Statistics (KNBS), GDP grew 5.0% in Q2 2025, up from 4.6% in Q2 2024. Agriculture, Fishing and Forestry remained the largest contributor, expanding 4.4%, slightly below the previous year’s 4.5%.
Sectors with slower growth:
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- Accommodation & Food Services: 7.8%, down from 35.0%.
- Financial Services Indirectly Measured: 1.4%, down from 10.3%.
- Other Services: 1.4%, down from 4.8%
Sectors with stronger growth:
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- Mining & Quarrying: 15.3%, up from 5.5%.
- Construction: 5.7%, rebounding from a contraction of -3.7%.
- Electricity & Water Supply: 5.7%, up from 1.2%.
This broad-based expansion highlights resilience across industries, even as some service sectors cooled compared to 2024.
PMI Trends Through 2025
For the first eleven months of 2025, the average PMI stood at 50.8, up from 49.5 in the same period of 2024. November’s PMI of 55.0 marked the third consecutive month of expansion, driven by faster growth in output and new orders, promotional pricing, and new product launches.
Headline inflation eased slightly to 4.5% in November, down from 4.6% in October, supported by improved supply chain efficiency. Output charges rose modestly as firms sought to remain competitive while supporting sales.
Outlook for 2026
Kenyan businesses remain optimistic in 2026. Survey respondents cited investment plans, diversification strategies, product rebrands, and increased advertising as key growth drivers. With employment rising and supply chains strengthening, firms are positioning themselves to capture future demand, even as inflationary risks linger.
East Africa 2026 Growth Outlook: Kenya, Uganda, Tanzania, Rwanda
