Kenya private sector contracts on weak demand, Middle East war

NAIROBI, Kenya, Apr 7 – Kenya’s private sector activity declined in March, ending a six-month growth streak as weak consumer spending and global disruptions weighed on businesses.

The Stanbic Bank Kenya Purchasing Managers’ Index fell to 47.7 in March from 50.4 in February, signaling a contraction in operating conditions for the first time since August 2025.

According to Standard Bank Group economist Christopher Legilisho, the slowdown reflects both demand-side and supply-side pressures.

“The weaker PMI reflects softer spending power constraining demand and concerns about the war in the Middle East,” he said.

The contraction was largely driven by reduced consumer demand, with firms reporting declines in output and new orders. Retail and services sectors were among the hardest hit as households cut spending.

At the same time, businesses faced rising fuel, transport, and shipping costs linked to ongoing geopolitical tensions, further squeezing margins.

Firms responded by scaling back inventories and input purchases, although employment levels remained relatively stable, supported by hiring in the agricultural sector.

Cost pressures remained elevated, with companies citing higher taxes and logistics expenses. However, weak demand limited their ability to pass on these costs to consumers.

Despite the downturn, about one-fifth of firms expressed optimism about growth over the next 12 months, supported by plans to expand operations, invest in digital marketing, and diversify products.

The report also showed a decline in backlogs of work—the first in nearly six years—indicating a broader slowdown in business activity.

Overall, the March PMI highlights the impact of external shocks and constrained domestic demand on Kenyan businesses, even as some firms pursue growth strategies.