Kenya’s economy contracted in May after a seven-month run, PMI survey shows
The rate of decline was, however, mild as businesses continued to raise their stock levels and labour capacity.
Kenya’s economic growth fell into negative territory in May, according to the latest Purchasing Managers’ Index (PMI) survey by Stanbic Bank.
This has been attributed the rise in prices as the contributing factor with a drop in customer spending and weaker business activity.
The headline PMI dropped from 52.0 in April to 49.6 in May, printing below the 50.0 no-change mark for the first time since last September.
The downturn ended a seven-month run of improving business conditions, although the rate of decline was mild as businesses continued to raise their stock levels and labour capacity.
Input prices ticked up at their fastest pace in the first four months of 2025, but overall cost pressures remained much softer than on average.
Conversely, selling charges rose at the weakest rate since last October as firms sought to ease the price burden on customers.
The lender indicates that the drop in PMI is an indication of a slight decline in the health of the private sector economy, following improvements in each of the previous seven months.
Total business output contracted at the fastest rate in ten months in May, although the overall downturn was only slight.
While 33 per cent of survey respondents noted that output had fallen since April, 29 per cent reported an expansion.
Declines were generally driven by the construction, wholesale & retail, and services sectors, whereas output increased in agriculture and manufacturing.
Order book inflows decreased at a modest pace, marking the first contraction since September 2024.
According to monitored firms, customer demand was lower due to rising prices and challenging economic conditions.
On the other hand, several firms still cited gaining new clients and benefiting from greater marketing.
The survey by Stanbic indicates that stocks of purchases across the private sector rose for the fifth month running in May.
However, a slight dip in input buying meant that the rate of accumulation was the slowest since new orders fell for the first time in eight months.
According to Christopher Legilisho, an economist at Standard Bank, the Stanbic Kenya PMI has signaled fragility in the private sector’s recovery.
Legilisho adds that the PMI indicates there was a moderate contraction in output and a decline in new orders after seven months of expansion.
“For pricing, the survey showed a softer increase in output prices, and a moderate increase in input prices, especially in the manufacturing sub-sector. Increases in materials prices were related to tax and customs obligations,” he stated.
The input price pressures accelerated throughout May, which businesses mainly attributed to greater purchase prices and heightened tax payments.
The increase in costs was the quickest since January, but remained well below the series Long-run trend.
This even as business expectations for the next 12 months remained subdued in May, ticking down to their second-lowest on record.
