Kenya’s private sector economy remained firmly in expansion territory in December, supported by resilient customer demand, rising business activity and the fastest pace of job creation in more than five years, a closely watched survey showed.
The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) eased to 53.7 in December from 55.0 in November, signalling a moderation in growth but still pointing to solid expansion. Any reading above the 50.0 mark indicates growth in business conditions, while levels below that threshold signal contraction.
Despite the slight slowdown, firms reported a strong end to 2025, with broad-based gains across output, sales and purchasing activity. Employment growth was particularly notable, accelerating to its strongest pace since November 2019, as companies responded to higher workloads and improving demand conditions.
“The Stanbic Bank Kenya PMI stayed in expansion territory, albeit slower this month, implying still strong demand conditions are driving new orders,” Stanbic Bank economist Christopher Legilisho said.
According to the survey, businesses experienced a marked increase in new orders, reflecting stronger consumer spending and improving confidence across key sectors of the economy. Higher sales volumes prompted firms to ramp up output and expand purchasing activity, while stock levels were also raised to support faster order fulfilment and maintain competitiveness.
The report showed that companies continued to benefit from improved supply-chain conditions. Supplier delivery times shortened sharply, reaching their best level since September 2021. Faster deliveries helped ease operational pressures and allowed firms to respond more efficiently to rising demand, the survey found.
Inflationary pressures, however, showed signs of reaccelerating in December after hitting a recent low in November. Firms reported higher input prices, citing increased tax burdens alongside rising fuel and raw material costs. Despite the uptick, the overall rate of input price inflation remained below the long-term average, suggesting cost pressures, while rising, are still relatively contained.
Output prices rose modestly during the month as some firms passed part of their higher costs on to customers. At the same time, wage costs increased only fractionally, indicating that labour-related inflation remains subdued for now. The divergence between input costs and wages points to potential margin pressures for businesses if cost increases persist.
Legilisho warned that improving demand conditions could feed into higher inflation in the months ahead. “Overall, this suggests that we could see higher inflation in the coming months from improving consumer demand as firms become more confident,” he said.
Looking ahead, business sentiment for 2026 remained positive, underpinned by expectations of continued economic recovery and expansion. Firms expressed optimism about future output, supported by plans to invest in new equipment, diversify product offerings and step up advertising and marketing efforts to capture market share.
The upbeat outlook reflects growing confidence that domestic demand will remain supportive, even as companies navigate rising costs and an evolving policy environment. Increased hiring plans also suggest that firms expect workloads to remain elevated in the near term.
Kenya’s private sector performance at the close of the year highlights the economy’s resilience amid lingering inflation risks and global uncertainty. While growth has cooled slightly from November’s strong pace, December’s PMI reading points to a solid underlying expansion, supported by job creation, improving supply chains and robust demand.
Analysts say the challenge for policymakers in 2026 will be to sustain growth momentum while keeping inflation in check, particularly as consumer spending strengthens and firms regain pricing power. For now, the PMI data suggest Kenya’s private sector entered the new year on relatively firm footing, with confidence outweighing caution despite rising cost pressures.
