Kenya’s private sector has hit a wall after seven months of steady recovery, with March 2026 marking the first reduction in business activity since August 2025.
The downturn, revealed in the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI), shows that solid declines in both output and new orders are straining the country’s private sector.
The PMI fell to 47.7 in March, down from 50.4 in February, marking a decline below the 50.0 mark that separates growth from contraction.
This also marked the fourth consecutive month in which the index has fallen since the previous survey period.
Why Kenya Private Sector Slumped in March
The slowdown in private-sector activity was broadly demand-led, with many firms citing constrained customer spending, reduced cash circulation, and tighter household budgets.
At the same time, the war in the Middle East led to more cautious spending among some firms, as well as logistical constraints on customer deliveries and higher fuel and transport costs.
Overall cost pressures accelerated in March, but the subdued demand environment kept the impact on selling charges minimal.
According to Stanbic’s PMI, the March findings highlighted the impact of constrained consumer budgets and external shocks from the war in the Middle East on Kenyan demand.
“A weaker Stanbic Kenya PMI in March reflects demand-side concerns, spending power constraining demand, and supply-side concerns about the war in the Middle East. Output and new orders declined in most sectors, implying that businesses expect to be constrained by the disruptions from geopolitical tensions,” noted Christopher Legilisho, Economist at Standard Bank.
Meanwhile, some firms continued to record growth, often attributing improved performance to marketing efforts, customer referrals, product and service innovation, and expanded digital sales channels.
However, a larger share reported that consumers and clients were financially stretched, leading to reduced order volumes.
Some businesses commented on disruptions to international transport due to the war, which also dampened sales.
The report noted that Kenyan companies also reported elevated cost pressures at the end of the first quarter.
Panelists frequently cited higher taxes, rising fuel and transport costs, and increased shipping expenses as factors pushing up purchasing prices, which rose at the sharpest rate in just over two years.
Also Read: Why Kenya’s Private Sector Growth Slowed to Four-Month Low in January
Slower Demand Keeps Output Prices in Check Despite Higher Costs
The report showed that output prices rose more slowly, as many firms indicated they were unable to fully pass on higher costs to customers amid softer demand and heightened competition.
Kenyan companies chose to hold leaner inventories in March to avoid dead stock, manage cash constraints, and respond to slower order pipelines.
Also Read: Stanbic PMI Report Reveals Which Sector Is Hiring More Kenyans
Private Sector Employment and Future Outlook
Employment trends also weakened, with firms reporting only a slight increase in staffing, the softest since October 2025.
This partly reflected a fall in outstanding business, the most pronounced in almost six years.
“Despite lower output and new orders, employment conditions held up as firms in the agrarian sector drove hiring,”Legilisho said.
Looking ahead, the survey data pointed to a degree of resilience in Kenyan business sentiment.
The year-ahead outlook for total activity was broadly unchanged since February, with just over a fifth of respondents forecasting growth.
Expectations were underpinned by plans to expand through new branches, increased advertising and online marketing, broader product and service offerings, and investment in capacity and human capital.
About PMI
Purchasing Managers’ Index™ (PMI®) surveys are available for over 40 countries and also for key regions, including the eurozone.
They are the most closely watched business surveys in the world, favored by central banks, financial markets and business decision makers for their
ability to provide up-to-date, accurate and often unique monthly indicators of economic trends.
