Kenyan Private Sector Shrunk For First Time In Seven Months

Kenya’s private sector showed clear signs of cooling in March, as businesses reported a solid decline in both output and new orders following six months of expansion.

The slowdown in private sector activity was broadly demand-led, with many firms pointing to constrained customer spending, reduced cash circulation and tighter household budgets. The Middle East war also resulted in more cautious spending patterns among some firms, as well as logistics constraints to customer deliveries and higher prices for fuel and transport.

Overall cost pressures accelerated in March, but the subdued demand environment meant that the impact on selling charges was minimal. 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.

At 47.7 in March, down from 50.4 in February, the Kenya PMI indicated a deterioration in operating conditions for the first time since August 2025. This also marked the fourth consecutive month in which the index has fallen since the previous survey period.

The March PMI findings highlighted the impact of constrained consumer budgets and external shocks from the Middle East war on Kenyan demand. Although some firms continued to record growth, often attributing improved performance to marketing efforts, customer referrals, product and service innovation, and expanded digital sales channels, 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. This resulted in the first decline in total order books for seven months in March, with the pace of decline solid overall. Businesses curtailed output in direct response, again for the first time in seven months.

Kenyan companies also reported elevated cost pressures at the end of the first quarter. Panellists 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.

Nevertheless, output prices rose at a slower pace, as many firms indicated that they were unable to fully pass higher costs on to customers amid softer demand and heightened competition. Kenyan companies broadly chose to hold leaner inventories in March, in order to avoid dead stocks, manage cash constraints, and respond to slower order pipelines. Employment trends also weakened, with firms reporting only a slight increase in staffing that was the softest recorded since October 2025.

This partly reflected a fall in outstanding business that was the most pronounced for almost six years. 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.

Read Also: Kenya PMI Slips To 50.4 in February As Private Sector Growth Nearly Stalls