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Kenya’s private sector recorded its sharpest deterioration in business conditions in nearly a year during May 2026, as rising costs, weak consumer demand and slowing sales weighed heavily on business activity, according to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI).
The PMI fell to 46.6 in May from 49.4 in April, marking the quickest decline in operating conditions since July 2024. A PMI reading below 50.0 indicates a deterioration in business conditions, while a reading above 50.0 signals improvement.
The survey showed that both business activity and new orders contracted at faster rates during the month, with firms citing reduced customer spending, inflationary pressures and tighter household and corporate budgets.
New sales declined at the fastest pace since the middle of 2025, as customers became increasingly cautious with spending amid rising prices. Construction and services firms experienced declines in both output and new business, while manufacturing was the only sector to register growth in production.
The downturn in demand also prompted businesses to reduce staffing levels for the first time in 16 months. Most of the job cuts affected temporary workers whose contracts were either shortened or not renewed. At the same time, firms reported sufficient capacity to handle workloads, leading to a further decline in outstanding business for a third consecutive month.
Input purchasing also fell for the first time in eight months as companies sought to manage costs and preserve cash flow. Consequently, inventory levels remained broadly unchanged despite improved supplier performance.
Inflationary pressures intensified during the month, with total input costs rising at the fastest rate since November 2023. Businesses reported significant increases in purchase costs, while fuel and transportation expenses were key contributors to the higher cost burden. Wage costs continued to rise, although only marginally.
In response to escalating expenses, firms increased their selling prices at the fastest pace in two-and-a-half years. All five monitored sectors recorded higher output charges, reflecting efforts by businesses to pass some of the increased costs on to customers.
Commenting on the findings, Christopher Legilisho, Economist at Standard Bank Group, said the PMI data pointed to a weakening business environment driven by sluggish demand and rising operational costs.
“The Stanbic Bank PMI data for May reflects a deterioration of business activity by private sector firms. Inventory purchases slowed from being expansive because of weakening sales, cash flow concerns and rising costs. Consumer resistance to spend, alongside rising costs, contributed to contractions in new orders and output,” said Legilisho.
He added that the declines may have been exacerbated by disruptions caused by week-long nationwide protests by transport sector players, which constrained the movement of people and goods and affected business operations.
Despite the challenging environment, businesses expressed greater confidence about future prospects. Firms cited increased advertising, planned investments in product diversification and expansion of online platforms as factors expected to support growth over the next 12 months.
Business optimism rose to its highest level since February 2023, with positive sentiment reported across all major sectors of the economy, suggesting that firms remain hopeful of a recovery despite current economic headwinds.
Data for the survey was collected between May 12 and May 27, 2026.