Private sector activity slackened at the start of 2025, on account of challenging economic conditions and a slowdown in client demand.
Stanbic Bank Kenya Purchasing Managers’ Index (PMI), which measures business conditions in Kenya’s private sector, registered a reading of 50.5 in January, marginally lower than December’s 50.6.
This marks the fourth consecutive month of growth, however, the expansion failed to translate into the output, which slowed to its weakest pace in the current growth sequence due to challenging economic conditions and a dip in client demand.
According to the index, momentum weakened, with January’s output rise being the slowest recorded in the fourmonth expansionary period.
Similarly sales growth eased to its lowest level since October 2024. In response, firms scaled back on purchasing activity, while employment numbers dropped slightly, ending a three-month hiring streak.
Most businesses kept staffing levels unchanged. Companies cited new client referrals, increased marketing efforts, improved cash flow, and easing inflationary pressures as key drivers of rising sales.
Inventory levels also saw an uptick as firms increased stock purchases to support business activity.
Standard Bank economist Christopher Legilisho says that firms were able to increase stocks purchased and inventories held—to cover higher sales as well as the future likelihood of difficulty in finding materials.
“Some firms nevertheless reported harsh economic conditions. Still, employment conditions were relatively stable. Kenyan businesses reported an increase in purchase prices for imported commodities, albeit a slower one than the preceding month, still attributed to higher taxes,” said Legilisho.
Price pressures persisted, though they softened from December’s 11-month high. While inflation remained solid, its rate of increase slowed. Businesses passed on higher costs to customers through price hikes, but the increase was the mildest seen in three months.
“Sales growth also eased to its
slowest since last October. As a result,
Kenyan firms reported a milder uplift in
purchasing activity at the start of the
year,” the index notes.
