Nairobi: Kenyan business conditions improved further as 2025 began, according to the Stanbic Bank Kenya Purchasing Managers Index (PMI) survey, with expansions in output and new orders signalled for the fourth month running. Activity growth nevertheless fell to its softest pace in this sequence, as businesses highlighted challenging economic conditions and a slowdown in client demand.
According to Kenya News Agency, Christopher Legilisho, an economist at Standard Bank, said that the Kenyan Purchasing Managers Index (PMI) expanded for a fourth month running in January but at a slightly weaker pace than in the two preceding months, reflecting the ongoing resilience of the private sector at the start of this year. Legilisho said that on a positive note, firms reported increases in both output and new orders, implying higher sales, more marketing, client referrals, and lower inflationary pressures. Firms were able to increase stocks purchased and inventories held-to cover higher sales as well as the future likelihood of difficulty in finding materials.
Some firms nevertheless reported harsh economic conditions. Still, employment conditions were relatively stable. ‘Kenyan businesses reported an increase in purchase prices for imported commodities, albeit a slower one than the preceding month, still attributed to higher taxes. Staff costs remained stable. Output prices increased but less briskly as firms passed on higher input and purchase prices to customers,’ said Legilisho. He explained that they foresee a slight easing in inflationary pressure during January than was the case in December. ‘The private sector’s confidence in January about the business outlook for the next 12 months remains weak, though better than in December,’ Legilisho said.
The PMI indicates that price pressures remained solid but moderated from December’s 11-month high. Firms responded by increasing their selling charges further, whilst staffing numbers dropped for the first time since last August. Kenyan companies saw sustained upturns in their activity levels and new work intakes during January. Survey panellists commented that new client referrals, increased marketing, improved cash flow, and an easing of inflationary pressures underscored the rise in sales. Firmer stock volumes-as evidenced by a renewed uplift in purchased item inventories-were also cited as supporting activity.
Growth momentum regarding output and new orders faded somewhat, however. The latest data signalled that January’s rise in output was the weakest recorded in the current four-month expansionary sequence and only marginal. Sales growth also eased to its slowest since last October. As a result, Kenyan firms reported a milder uplift in purchasing activity at the start of the year. Similarly, employment numbers fell fractionally, ending a three-month run of growth in the final quarter of 2024. Most respondents kept their staffing levels unchanged.
On prices, the latest survey data offered mixed results in January. Overall input prices continued to rise at a solid pace, which companies largely attributed to the impact of higher taxation on imported material prices. However, the rate of inflation softened from December, when it reached its highest level since January 2024. In many cases, firms reporting higher purchasing costs raised their selling charges accordingly. The overall increase was solid, but the softest recorded in three months.
Expectations for business activity over the next 12 months remained among the weakest observed on record in January, despite improving slightly since the end of last year. Only 6% of surveyed companies gave a positive output projection, with strategic focuses such as new products and services and increased marketing activity reportedly driving these forecasts.
