Kenya’s private sector maintained its growth trajectory for the fourth consecutive month in January, albeit at a slightly slower pace compared to the previous two months, according to the latest Stanbic Purchasing Manager Index (PMI) report.
The PMI recorded a marginal drop to 50.5 in January from 50.6 in December, signalling continued expansion from the last quarter of 2024 into the beginning of 2025. A PMI reading above 50.0 indicates an improvement in business conditions, whereas a figure below this threshold suggests a downturn.
Kenyan businesses experienced steady growth in output and new orders, driven by increased client referrals, enhanced marketing efforts, improved cash flow, and reduced inflationary pressures with the overall inflation coming in at 3.3% at January 2025, which is within the CBK preferred range of 2.5%-7.5%.
The Purchasing Managers Index (PMI) expanded for the fourth consecutive month in January but at a slightly weaker pace than in the preceding months, reflecting the ongoing resilience of the private sector at the start of this year.
Production levels grew in January, though at the slowest rate in two months, driven by higher sales, improved marketing strategies, and stronger stock levels. Purchasing activity also saw a mild increase, with firms boosting their inventory to meet rising sales and mitigate potential supply chain disruptions.
Stanbic’s report highlighted that “price pressures remained solid but moderated from December’s 11-month high. Firms responded by increasing their selling prices further, while staffing numbers declined for the first time since August.”
Employment levels saw a decline for the first time since August, as businesses maintained relatively stable staffing levels. Payment delays contributed to rising backlogs of work, while wages and salaries remained largely unchanged.
Despite the moderate growth, business confidence across the private sector remained weak. Only 6% of firms expressed optimism about the next 12 months, citing hopes for new product launches and increased marketing efforts as key drivers of future growth.
Looking ahead, we expect the business environment to improve in the short to medium term, supported by a strengthening economy. This optimism is driven by lower interest rates following a more accommodative monetary policy with the CBR rate being lowered by 50 bps to 10.75% in February 2025, from 11.25% in December 2024, the stability of the Kenyan Shilling against the USD, and controlled inflation alongside stable fuel prices. However, businesses may face challenges due to the high cost of living and increased taxation, which could raise input costs. Overall, the private sector is likely to sustain its recovery, though potential headwinds may arise in the coming months.
