Kenya’s private sector delivered its strongest performance in almost four years during October, marking a significant turning point as businesses shake off the disruptions that plagued earlier in the year.
The Stanbic Bank Kenya Purchasing Managers’ Index (PMI), a key barometer of economic health, rose to 52.5 in October from 51.9 in September—its highest reading since February 2022. Any figure above 50 signals expansion, and the latest data points to gathering momentum across all major sectors of the economy.
The improvement caps a remarkable recovery for Kenya’s business community, which faced significant headwinds during the second quarter when widespread protests disrupted commercial activity. Now, with two consecutive months of expansion under their belt, companies are reporting renewed confidence driven by strengthening consumer demand and improving economic fundamentals.
Output Surges as Consumer Confidence Returns
Business activity expanded at the fastest pace since December 2021, with firms across agriculture, mining, manufacturing, construction, and services all reporting growth. The broad-based nature of the expansion suggests the recovery is gaining traction across the entire economy rather than being concentrated in specific sectors.
“Kenya’s private sector in October saw both output and new orders up sharply as conditions improved for consumers and firms benefited from softer inflation,” said Christopher Legilisho, Economist at Standard Bank. “Firms ramped up quantities purchased and increased inventory levels, expecting higher consumer demand.”
The surge in activity was fueled by robust sales growth, with new orders increasing for the second consecutive month. Approximately a quarter of surveyed firms reported higher sales volumes, attributing the uptick to improved customer confidence, effective marketing campaigns, new product launches, and the ability to offer promotional pricing in a more benign inflation environment.
Inflation Pressures Ease to 13-Month Low
Perhaps most encouraging for both businesses and consumers is the moderation in cost pressures. Input costs rose at their slowest pace in 13 months, with purchase prices and wage costs both increasing at a gentler rate than in September.
The easing inflation environment has given businesses room to maneuver on pricing, with several companies offering discounts to capture market share as economic activity improves. Output price increases remained modest, with only the wholesale and retail sector seeing noticeable price adjustments.
When cost increases were reported, businesses primarily cited rising import prices and higher taxes, including increases in VAT and fuel duties. However, these pressures were significantly less intense than in previous months.
“Pricing indicators were soft in October, as input prices, purchase prices, staff costs and output prices increased only modestly,” Legilisho noted. “Low price pressures imply that, while output conditions have improved, they are not fueling demand-driven inflation.”
Supply Chains Stabilize, Purchasing Activity Returns
The improved economic environment prompted firms to ramp up procurement for the first time since April. Total purchasing activity expanded as businesses responded to rising demand and built up inventories in anticipation of continued growth.
Supply chains continued to perform efficiently, with delivery times shortening for the ninth consecutive month. Companies attributed this to lighter supplier workloads following months of subdued demand and increased competition among vendors, though the pace of improvement moderated from September’s four-year high.
With purchases increasing and deliveries arriving faster, businesses were able to expand their input inventories during October—a sign of growing confidence in sustained demand.
Employment Remains Steady as Businesses Clear Backlogs
While firms increased their purchasing activity, employment growth was more measured. Job creation remained marginal, with over 97% of companies reporting no change in staffing levels. Some businesses hired additional workers to support sales growth and new projects, but the overall approach remained cautious.
Companies continued working through outstanding orders efficiently, with backlogs declining for the fifth consecutive month. The reduction suggests businesses are managing to meet current demand without significantly expanding their workforce.
Cautious Optimism About the Future
Despite the strong October performance, business expectations for future output dipped to a four-month low, though they remained among the strongest seen since early 2023. Exactly 20% of surveyed firms forecast increased activity over the next 12 months, with the remainder maintaining neutral outlooks.
Many companies highlighted plans to diversify their operations as a strategy to boost future output, suggesting a more strategic approach to growth rather than simple expansion of existing lines.
What This Means for Kenya’s Economy
The October PMI data provides tangible evidence that Kenya’s economy is finding its footing after a turbulent mid-year period. The combination of strong output growth, rising sales, easing inflation, and improving supply chains creates a favorable environment heading into the traditionally robust fourth quarter.
For businesses, the data suggests conditions are ripe for investment and expansion, particularly given the more accommodative cost environment. For policymakers, the absence of demand-driven inflation despite robust growth provides room for supportive economic policies.
The question now is whether this momentum can be sustained into 2026, particularly as businesses navigate ongoing challenges including tax pressures and import cost volatility. However, for now, Kenya’s private sector appears to have turned a corner, offering genuine grounds for optimism as the year draws to a close.
About the PMI
The Stanbic Bank Kenya PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in approximately 400 private sector companies. The survey covers agriculture, mining, manufacturing, construction, wholesale, retail, and services sectors. Readings above 50.0 indicate expansion, while readings below 50.0 signal contraction.
