Kenya’s private sector activity expanded in January 2026, but at a slower pace, as weaker demand in construction and wholesale and retail sectors weighed on overall momentum.
The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) fell to 51.9 in January from 53.7 in December, marking a four‑month low. Readings above 50.0 indicate growth, while those below signal contraction.
Sectoral Divergence
Stanbic Bank noted sharp differences across industries:
“Sectoral differences were marked, with sales growth most often recorded among manufacturing firms. Conversely, those in the construction and wholesale and retail sectors saw demand fall outright,” the survey commentary stated.
Manufacturing firms continued to record the strongest gains in sales and output, helping to sustain overall growth. However, demand declined in construction and retail, underlining uneven conditions across the economy.
Business Conditions and Drivers
The PMI report highlighted that business activity and new orders rose, but at a slower pace, reflecting softer demand after a strong finish to 2025. Firms attributed output growth to customer referrals, marketing efforts, higher order books, and new contracts, supported by competitive pricing strategies.
“Kenyan business conditions improved again during January, but at a reduced rate, as the pace of activity growth eased due to a slower uplift in sales,” the PMI noted.
Employment expansion and purchasing activity moderated, though both remained positive. Notably, backlogs declined at the fastest rate since April 2021, pointing to improved operational efficiency.
Costs and Pricing Pressures
Operating costs rose at a solid pace, driven by higher raw material prices, tax charges, import fees, and technology expenses. Output prices increased only marginally, as firms restrained price hikes amid competitive pressures and market saturation.
“Reportedly, several companies eased back on price hikes due to market saturation and concerns over slowing growth,” the survey added.
Supply chain performance continued to improve, extending a year‑long trend of faster vendor delivery times. Inventories, however, grew only marginally, with stock levels at a six‑month low.
Economist View
Christopher Legilisho, Economist at Standard Bank, said the data underscored resilience despite slower growth:
“The Stanbic Kenya PMI releases for January 2026 continue to show a robust private sector. Despite slightly lower output, new orders and employment growth, January metrics were positive, confirming a sustained expansion of activity in the private sector,” he explained.
He added that improved access to credit supported output, while competition curbed price increases.
“That said, increased competition made firms restrain price increases, as corroborated by headline inflation in January easing to 4.4% year‑on‑year,” Legilisho noted.
Outlook
Despite the slowdown, business sentiment improved slightly in January, with output expectations rising to a five‑month high. Firms cited expansion plans, new premises, diversification strategies, increased marketing, and contract bidding as drivers of future growth.
Kenya’s finance ministry projects GDP growth of 5.3% in 2025 and 2026, up from 4.7% in 2024. The World Bankexpects growth at 4.9% this year, maintaining that pace over the next two years.
