Contraction In Private Sector Business Conditions Eases Substantially

The Stanbic Bank Kenya PMI® pointed to a near recovery in business conditions across the private sector in August, after July data signaled that business activity was heavily dented by weak sales and protest-led disruption. Output, new business, and purchasing fell at softer rates, while employment continued to rise and inventories saw a renewed uptick.

Businesses also showed greater confidence in the year-ahead outlook, as they hoped that new marketing activities and product offerings would support growth. In fact, positivity was at its highest level in two-and-a-half years. However, firms were still beset by a marked rise in overall cost burdens. The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI®).

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration. The headline PMI increased to 49.4 in August, from a 12-month low of 46.8 in July. Whilst still below the 50.0 no-change mark, the index signaled a much softer decline in operating conditions midway through the third quarter.

New orders received by Kenyan businesses fell for the fourth month running in August. However, the rate of decline softened markedly and was the slowest recorded in this period. While some firms continued to highlight weak purchasing power at clients, others saw a pick-up in new business and a general recovery in economic conditions from the last few months of protest-related disruption.

Consequently, output levels fell at a more modest pace during the latest survey period. There was also a softer reduction in the purchasing of inputs, as some companies were encouraged by the improving demand outlook to restart procurement activity. This allowed inventories to rise slightly after a drop in July.

Employment levels also increased. Although job creation remained mild, the uplift was the fastest seen in 15 months. Higher workforce capacity and inventory building allowed firms’ New orders to almost stabilize in August. Softer reductions in output and purchasing.

Business confidence rises to a 30-month high. Comment Christopher Legilisho, Economist at Standard Bank, commented: “ Data were collected 12-27 August 2025. © 2025 S&P Global Stanbic Bank Kenya PMI® to reduce their backlogs for the third month running. Vendor performance improved notably in August. Greater competition across the supply chain reportedly led to the fastest reduction in delivery times since October 2021. Kenyan companies reported a solid increase in input costs in August, although the pace of inflation slowed down for the first time in five months.

While wage pressures intensified, the increase in purchase prices was less marked than in July. A number of firms commented on higher costs linked to taxes on items such as fuel. Nevertheless, as part of efforts to stimulate a recovery in demand, output charges rose only marginally and to the least extent in 12 months.

Finally, businesses showed a greater level of optimism towards future output for the third consecutive month in August, which took overall sentiment to its highest since February 2023. With demand stabilizing, companies reportedly placed greater confidence in their ability to secure higher sales through increased marketing and diversification efforts.

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