Kenya’s private sector ended 2025 on a positive footing, with business activity continuing to expand in December despite signs of moderating momentum, according to the latest Purchasing Managers’ Index released by Stanbic Bank.
The Stanbic Kenya PMI stood at 53.7 in December, down from 55.0 in November. While the decline points to a slower rate of growth, the index remained above the 50.0 neutral mark for the fourth consecutive month, signalling a sustained improvement in overall business conditions across the economy.
A PMI reading above 50 indicates expansion, while a figure below 50 signals contraction. The December outcome suggests that Kenyan firms continued to experience growth in output, employment and demand, even as some of the factors that had driven stronger gains in previous months began to ease.
According to Stanbic, the slower expansion in December was largely attributable to softer increases in sales and purchasing activity compared to November. Even so, companies continued to report rising new orders, reflecting resilient consumer demand and improved market conditions toward the end of the year.
“The latest PMI data show that Kenya’s private sector remained in expansionary territory in December, underpinned by growth in output and employment,” Stanbic said in its commentary accompanying the release. “However, the pace of growth moderated compared to November, mainly due to slower increases in sales and purchases.”
Output and demand remain supportive
The December survey indicated that output continued to rise across both the manufacturing and services sectors, supported by ongoing improvements in customer demand. Firms reported higher sales volumes, with some attributing the growth to seasonal demand, improved cash flow among customers and increased marketing efforts.
New business intakes expanded for the fourth month in a row, suggesting that demand conditions remained broadly favourable despite economic pressures facing households and businesses. While the pace of growth in new orders was softer than in November, it remained strong enough to support continued increases in activity.
The sustained expansion in output highlights a degree of resilience in Kenya’s private sector as firms navigate a challenging operating environment characterised by elevated input costs, tight financial conditions and currency-related pressures experienced earlier in the year.
Employment growth continues
The Stanbic PMI also pointed to a continued increase in employment levels in December, reflecting firms’ efforts to meet higher workloads and clear backlogs of work. Although job creation eased slightly compared to November, employment growth remained positive, adding to signs of improving business confidence.
Companies surveyed indicated that staff hiring was driven by rising output requirements and expectations of stable or improving demand in the months ahead. The continuation of employment growth is a notable signal for the broader economy, where job creation remains a key concern amid high youth unemployment and cost-of-living pressures.
At the same time, some firms reported a more cautious approach to hiring, citing cost considerations and uncertainty around the pace of demand growth in early 2026. This caution may help explain the slower overall PMI reading compared to the previous month.
Purchasing activity and inventories
Purchasing activity increased again in December, supported by higher production requirements and efforts by firms to replenish inventories. However, the rate of growth in purchases slowed compared to November, contributing to the overall moderation in the PMI.
Some firms reported that supply chain conditions had improved, allowing for smoother procurement of inputs and reduced delivery delays. Improved supplier performance has been a recurring theme in recent PMI readings, reflecting a gradual easing of logistical challenges that had previously weighed on business operations.
Stocks of purchases rose modestly during the month, as firms sought to ensure adequate input availability ahead of anticipated demand in early 2026. However, inventory accumulation remained measured, suggesting that businesses are balancing optimism with caution in their planning.
Prices and cost pressures
While the PMI release highlighted improvements in activity, firms continued to face cost pressures in December. Input prices remained elevated, driven by higher costs for raw materials, fuel and transport. Some companies also cited exchange rate effects as a factor influencing import costs.
Despite these pressures, the pace of input cost inflation showed signs of stabilisation, offering some relief to businesses after months of sustained increases. Output prices continued to rise as firms passed some of the higher costs on to customers, although competitive pressures limited the extent of price hikes in certain sectors.
The interaction between costs and pricing remains a key issue for Kenyan firms, particularly as consumer purchasing power remains under strain. The ability of businesses to manage costs without significantly eroding demand will be critical in shaping performance in the coming months.
Business confidence and outlook
Business sentiment remained positive in December, with firms expressing confidence in the outlook for activity in 2026. Expectations were supported by anticipated improvements in economic stability, easing inflationary pressures and hopes for stronger consumer demand.
Some respondents pointed to policy stability and infrastructure investment as factors that could support growth, while others highlighted the potential benefits of improved access to credit and a more predictable operating environment.
However, optimism was tempered by concerns over global economic uncertainty, domestic taxation pressures and the lingering impact of high living costs on consumer spending. These factors may continue to influence business decisions, particularly in relation to investment and hiring.
PMI as a barometer of economic health
The Purchasing Managers’ Index is widely regarded as a key indicator of economic performance, offering timely insights into trends in output, demand, employment and prices. Compiled from monthly surveys of private sector companies, the PMI captures conditions in both the manufacturing and services sectors, which together account for a significant share of Kenya’s economic activity.
A sustained period above the 50.0 mark, as seen in recent months, suggests that the private sector is on a recovery path following periods of slower growth earlier in the year. The December reading reinforces the view that, while growth momentum has moderated, underlying business conditions remain supportive.
For policymakers, investors and business leaders, the PMI provides an important snapshot of how firms are responding to economic conditions on the ground. The December data point to cautious optimism, with continued expansion but at a more measured pace.
As Kenya enters 2026, the trajectory of the PMI will be closely watched for signs of whether the private sector can maintain growth momentum amid ongoing economic adjustments and global uncertainties.
