Kenya’s private sector activity shrank in May 2025, marking the first contraction in seven months, according to the latest Stanbic Bank Purchasing Managers’ Index (PMI). The index fell to 49.6, dropping below the 50.0 mark that separates growth from decline, signaling a tightening economic environment.
The contraction was largely driven by slowdowns in the construction and retail sectors, which analysts attribute to weak demand, rising operational costs, and uncertainty surrounding fiscal policies—especially the controversial Finance Bill currently under public scrutiny.
“Business conditions deteriorated slightly in May, breaking the positive momentum we’ve seen since October,” said Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank. “Input costs remain high, while consumer spending is showing signs of fatigue.”
Despite the downturn, the agriculture and manufacturing sectors remained resilient, providing a buffer to an otherwise subdued private sector. Agricultural performance benefited from favorable weather patterns and rising regional demand, while manufacturing growth was buoyed by increased production of consumer goods.
However, hiring trends remained flat, and business confidence dipped as firms expressed concern over potential tax changes, inflationary pressures, and exchange rate volatility.
Economists caution that unless policy clarity is restored and cost drivers are addressed, the outlook for the private sector could remain fragile in the coming months.
