Kenya’s private sector continued to expand in January but at a slower pace, as growth in construction and wholesale and retail sectors lagged, according to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI).
The headline PMI fell to fifty-one point nine in January from fifty-three point seven in December, remaining above the fifty-point threshold that separates expansion from contraction, but signalling a moderation in overall business activity.
“Sectoral differences were marked, with sales growth most often recorded among manufacturing firms,” Stanbic Bank said in comments accompanying the survey. “Conversely, those in the construction and wholesale and retail sectors saw demand fall outright.”
The slowdown in the construction sector was linked to delayed projects and seasonal reductions in public works activity, while wholesale and retail firms cited weak consumer demand and tighter household budgets following festive spending in December.
Despite the softer start to 2026, input purchases and new orders continued to grow, albeit at slower rates than in December. Firms reported rising costs for raw materials and staff, which in some cases were passed on to customers through higher output prices.
Employment in the private sector showed a modest increase, reflecting continued optimism among companies that demand would recover later in the year. Survey respondents indicated confidence that output would expand over the coming twelve months, driven by planned investment, stock accumulation, and expectations of stronger orders.
The survey results align with Kenya’s broader economic outlook. The Finance Ministry projects GDP growth of five point three percent in both 2025 and 2026, up from four point seven percent in 2024. The World Bank, in its latest forecast, raised its estimate for 2026 to four point nine percent, up from four point five percent in May, and expects the country to maintain this pace over the next two years.
Analysts said the January PMI reading points to a temporary moderation rather than a structural slowdown, noting that expansion in manufacturing and services continues to support the overall economy. “The private sector remains resilient, but growth is uneven across industries,” said a Nairobi-based economist who requested anonymity. “Construction and wholesale sectors typically slow at the start of the year, but manufacturing and services are keeping activity broadly positive.”
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The PMI survey is based on responses from purchasing managers across roughly four hundred private sector firms in manufacturing, services, construction, and trade. It provides a timely indicator of economic conditions, complementing official statistics that are typically released with a lag.
Sector-specific data showed that manufacturing firms benefited from steady domestic demand and export orders, while services continued to expand moderately, supported by rising consumer spending and digital transactions. However, both sectors reported higher input costs, reflecting ongoing inflationary pressures in energy, transport, and raw materials.
“The slowdown in January is partly seasonal, but cost pressures are beginning to bite,” the economist added. “Firms are adjusting prices cautiously, while maintaining staffing levels in anticipation of recovery later in the year.”
Government infrastructure programs, monetary policy measures, and ongoing investments in energy and transport are expected to support private sector activity through 2026. Analysts also pointed to Kenya’s regional trade position within the East African Community as a source of continued demand for manufactured goods and services.
Overall, the January PMI reading underscores a cautiously optimistic outlook for Kenya’s private sector. While growth has slowed, expansion remains broadly positive, suggesting that underlying demand and investment intentions could sustain the economy’s projected five percent growth trajectory this year.
The survey highlights the need for targeted policy support to boost lagging sectors such as construction and wholesale trade while ensuring that inflation and cost pressures do not dampen overall private sector activity.
