Kenya’s private sector activity shrank in March for the first time in seven months, a closely watched business survey showed Tuesday, as weaker consumer demand, tighter household budgets and fallout from the conflict in the Middle East weighed on firms across much of the economy.
The Stanbic Bank Kenya Purchasing Managers’ Index fell to 47.7 in March from 50.4 in February, slipping below the 50-point threshold that separates growth from contraction. It was the first time since August 2025 that the index had signalled a downturn in business conditions.
The decline points to a loss of momentum in one of East Africa’s most diversified economies at a time when businesses are facing pressure from both domestic demand weakness and external shocks. Survey respondents said customers were spending more cautiously, cash circulation had tightened and household finances remained under strain, limiting orders and slowing activity across most sectors.
Stanbic Bank, which sponsors the monthly survey, said the slowdown was “broadly demand-led”, highlighting the extent to which businesses are being squeezed not just by higher operating costs but by fragile consumer purchasing power.
The survey also pointed to the growing economic impact of the war in the Middle East, which has sent oil prices higher and disrupted logistics routes. Stanbic said firms cited more cautious spending behaviour linked to the conflict, as well as delivery constraints and rising fuel and transport costs. Those pressures are particularly significant for Kenya, a net oil importer that depends heavily on external trade flows for both energy and manufactured inputs.
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Only the wholesale and retail segment recorded growth in March, suggesting that much of the economy — including manufacturing, services and construction — struggled to maintain momentum. Output and new orders fell in most sectors, underlining how quickly external uncertainty can filter through to business sentiment and day-to-day commercial activity.
Christopher Legilisho, an economist at Stanbic Bank, said the data suggested firms expected disruptions linked to geopolitical tensions to continue weighing on operations and demand.
The weaker PMI reading comes as Kenya’s government tries to preserve confidence in an economy that has shown resilience but remains exposed to imported inflation, debt servicing costs and fragile household incomes. President William Ruto said late last month that authorities were assessing the impact of the Middle East conflict on prices and taking steps to ensure the country maintained sufficient supplies of key goods.
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The latest survey is likely to reinforce concerns that the global energy shock could slow economic activity across East Africa if oil prices remain elevated and shipping disruptions persist. For Kenya, higher fuel and freight costs tend to feed quickly into transport, food and production prices, putting additional pressure on consumers and businesses alike.
That said, the government remains relatively upbeat about the broader outlook. Kenya’s finance ministry has forecast economic growth of 5.3 percent this year after estimating 5.0 percent growth in 2025, up from 4.7 percent in 2024. Those projections suggest officials still expect the economy to expand at a solid pace, supported by agriculture, services, infrastructure spending and private consumption.
But the March PMI shows that outlook is becoming harder to sustain as households rein in spending and firms contend with a more difficult operating environment. If higher energy prices and geopolitical uncertainty persist, Kenya’s businesses may find it increasingly difficult to pass on costs without further weakening demand.
The survey therefore offers an early warning that even economies with relatively strong medium-term growth forecasts are not insulated from global shocks. For policymakers, the challenge will be to contain inflationary pressures and support supply resilience without undermining an already delicate recovery in private sector confidence.
