Kenya’s private sector activity remained in contraction territory in April, as rising fuel costs and broader price pressures continued to squeeze businesses and weaken consumer demand.
The latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI) shows, the headline PMI inched up to 49.4 in April from 47.7 in March, signalling a second consecutive month of deteriorating business conditions.
The marginal improvement points to a private sector still grappling with cost shocks, particularly those linked to elevated global fuel prices, which have filtered through to transport, production and overall operating expenses.
Survey data shows that both output and new orders declined for the second month running, reflecting subdued demand across key sectors including wholesale and retail trade, agriculture and services.
However, the pace of contraction eased compared to March, offering a tentative sign that the worst of the slowdown may be moderating.
Businesses widely attributed weaker sales to reduced customer spending as higher prices erode purchasing power.
The inflationary pressure has been largely driven by increased fuel costs, partly linked to geopolitical tensions in the Middle East, which have disrupted global energy markets and supply chains.
“Concerns about rising costs, tied to higher transport costs and the ability to secure supplies, weighed on output and new orders,” said Standard Bank economist Christopher Legilisho.
Cost pressures intensified sharply in April, with input prices rising at the fastest rate since December 2023. More than 18 percent of surveyed firms reported higher expenses, driven by fuel, shipping charges and material shortages.
In response, companies passed on these costs to consumers, with output prices increasing at the quickest pace in nearly two-and-a-half years. This marks a shift from March, when firms had attempted to absorb some of the cost increases to protect demand.
Despite the challenging environment, there were pockets of resilience. The decline in new orders was only marginal, with some firms reporting improved sales supported by marketing efforts, product innovation and expansion strategies.
At the same time, purchasing activity continued to expand, extending a seven-month growth streak, although at a slower pace. Firms also ramped up inventory accumulation, with stocks of purchases rising at the fastest rate so far this year.
“Employment conditions remained robust in April, with firms mostly hiring temporary workers. Inventory levels recovered notably as firms stocked up ahead of inevitable price increases,” said Legilisho.
“As expected, prices rose sharply, input and output prices increased due to higher fuel prices and shipping charges because of the conflict in the Middle East. However, wage costs rose only marginally.”
The build-up in inventories reflects growing concerns among businesses about future supply disruptions and further price increases, prompting precautionary stockpiling.
Supply chain conditions, however, remained relatively stable. Supplier delivery times improved for the fifteenth consecutive month, suggesting that reduced demand may be easing pressure on logistics networks.
Employment trends offered a more positive signal, with firms increasing staffing levels for the fifteenth straight month. Hiring was largely driven by the need to support ongoing projects, with many companies relying on temporary or casual workers.
However, wage growth remained subdued, indicating that while firms are adding headcount, they are cautious about raising fixed labour costs amid uncertain demand conditions.
According to the data Standard Bank, business confidence weakened for the third consecutive month, reflecting ongoing uncertainty about the economic outlook.
