The latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI) indicates that Kenya’s private sector continued to expand in January 2026, though at a slower pace.
According to the PMI, growth eased to a four-month low amid softer demand and more cautious hiring and purchasing.
The headline PMI fell to 51.9 in January, down from 53.7 in December, marking the fifth consecutive month above the 50.0 threshold that separates expansion from contraction. However, Stanbic said the latest reading signalled the weakest improvement in business conditions since September 2025.
The report noted that business activity and new orders continued to rise, but at a slower pace, reflecting a slowdown in sales momentum after a strong end to last year.
Firms attributed output growth largely to demand-side factors, including increased 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 report noted.
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While overall output growth remained solid and well above the long-run survey average, the rate of expansion slipped to its lowest level in four months. New business growth also decelerated to the weakest pace over the same period, highlighting a more cautious start to the year for many firms.
Sectoral performance was mixed. Manufacturing firms recorded the strongest gains in sales and output, helping to support overall growth. In contrast, demand declined in both the construction and wholesale and retail sectors, underlining uneven conditions across the economy.
With activity growth slowing, firms moderated their employment expansion in January. Purchasing activity also eased, though it remained robust overall. The report linked this to a reduction in backlogs, suggesting improved operational efficiency.
Notably, the rate at which outstanding work declined was the fastest since April 2021, pointing to better capacity management across businesses.
Competition curbs price hikes
At the same time, operating costs increased at a solid pace. Businesses cited rising raw material prices, higher tax charges, import fees and technology-related expenses. Output prices also rose, though only marginally, as competitive pressures and concerns about market saturation limited firms’ ability to pass on higher costs.
“Reportedly, several companies eased back on price hikes due to market saturation and concerns over slowing growth.”
Supply chain performance continued to improve, extending a year-long trend of faster vendor delivery times. However, firms reported that inventories rose only marginally, with stock levels growing at a six-month low, partly due to unused inputs and softer demand expectations.
Stanbic PMI highlights sustained expansion and easing inflation pressures
Commenting on the findings, Christopher Legilisho, Economist at Standard Bank, said the data continued to point to underlying resilience in Kenya’s private sector.
“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 said.
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Legilisho added that improved access to credit had supported output, while supplier delivery times continued to shorten amid increased competition.
According to him, higher input prices, purchase costs, staff costs and output were likely due to higher taxes and rising technology costs.
“That said, increased competition made firms restrain price increases, as corroborated by headline inflation in January easing to 4.4% year-on-year,” he added.
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 increased contract bidding as drivers of future growth.
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