Kenya’s private sector contracted for a third straight month in May as higher fuel prices and inflation squeezed demand, with the Stanbic Bank PMI falling to 46.6 from 49.4.
The Purchasing Managers’ Index (PMI), where a reading below 50 signals contraction, posted its sharpest monthly deterioration since July 2024. Firms reported falling output, new orders and purchasing, and trimmed staff as customers reined in spending against a backdrop of rising prices.
The squeeze came largely from energy. Kenya’s annual inflation accelerated to 6.7 percent in May from 5.6 percent in April, its highest in more than two years, as fuel costs climbed on the back of the conflict in the Middle East. Higher transport and logistics expenses lifted operating costs and eroded household purchasing power.
Input cost pressure was severe, with purchase prices rising at the fastest pace since November 2023. Many firms passed some of the burden on, pushing output charges up at their steepest rate in two and a half years, with all five monitored sectors raising prices. That further weighed on demand. Manufacturing was the only sub-sector to register growth.
Despite the strain, businesses turned more optimistic about the year ahead, with confidence at its strongest since February 2023. Firms pointed to planned investment, advertising, product diversification and expanding online sales as reasons to expect a recovery. Stanbic economist Christopher Legilisho noted that intensifying inflationary pressure had constrained demand while driving up input, purchase and output prices.
Kenya’s statistics office expects the economy to grow 4.9 percent in 2026, up from 4.6 percent last year. Economists caution, however, that persistent inflation and external shocks could undermine that outlook if they keep eroding consumer spending and business activity.
