Kenya’s Private Sector Records Strongest Growth Since 2022 as PMI Climbs to 52.5

Kenya’s private sector demonstrated remarkable resilience and growth momentum in October, with business activity expanding at the strongest pace recorded in nearly three years, according to the latest Purchasing Managers’ Index data. The positive trajectory signals a significant economic turnaround for East Africa’s largest economy as it recovers from disruptions that characterized earlier periods of 2025.

The Stanbic IBTC Bank Kenya PMI, compiled by S&P Global, registered 52.5 in October, up from 51.9 in September, marking the second consecutive month that the index has remained in expansion territory above the neutral 50.0 threshold. This reading represents the highest level recorded since February 2022, underscoring the robustness of Kenya’s economic recovery and the strengthening confidence among businesses operating across various sectors.

Build the future you deserve. Get started with our top-tier Online courses: ACCA, HESI A2, ATI TEAS 7, HESI EXIT, NCLEX-RN, NCLEX-PN, and Financial Literacy. Let Serrari Ed guide your path to success. Enroll today.

Understanding the PMI Surge

The Purchasing Managers’ Index serves as a crucial barometer of private sector health, incorporating data on new orders, output levels, employment, supplier delivery times, and inventory levels. A reading above 50.0 indicates expansion in business activity, while a reading below this threshold signals contraction. Kenya’s October reading of 52.5 not only indicates expansion but suggests a solid and accelerating improvement in overall operating conditions across the private sector.

The latest survey results indicate a comprehensive rebound in Kenya’s private sector following significant disruptions caused by widespread protests during the second quarter of 2025. These demonstrations, which were triggered by proposed tax increases and cost-of-living concerns, had temporarily dampened business activity and created uncertainty among investors and business operators. The robust October performance suggests that the economy has successfully navigated past these challenges and is now positioned on a stronger growth trajectory.

Output and New Orders Drive Expansion

A critical driver of October’s strong PMI performance was the sustained increase in both output and new business intakes, which rose for the second consecutive month with accelerating growth rates. The expansion in output was particularly impressive, representing the strongest increase recorded since December 2021, a period that preceded various global and domestic economic challenges including supply chain disruptions and inflationary pressures.

Kenyan firms attributed this output surge to several converging factors. First, they cited robust demand conditions stemming from improving economic prospects and growing consumer confidence. As household financial situations stabilize and inflation moderates, consumers have demonstrated increased willingness to spend on goods and services, providing businesses with stronger revenue streams and justification for expanding production levels.

Second, companies reported success from new product launches that attracted customer interest and generated additional sales volumes. This innovation-driven growth suggests that Kenyan businesses are not merely benefiting from cyclical economic improvements but are actively adapting their offerings to meet evolving market demands and consumer preferences.

Third, promotional pricing strategies implemented by various firms helped stimulate demand and capture market share in an increasingly competitive business environment. These tactical price adjustments, made possible by moderating input costs, allowed companies to offer attractive value propositions to price-sensitive consumers while maintaining acceptable profit margins.

Broad-Based Sectoral Growth

One of the most encouraging aspects of October’s PMI data was the broad-based nature of the expansion, with all main sectors monitored by the survey experiencing upticks in activity. This comprehensive growth pattern indicates that Kenya’s economic recovery is not confined to specific industries but rather reflects fundamental improvements in overall business conditions that benefit diverse economic activities.

The wholesale and retail sector, which serves as a critical link between producers and consumers, showed particularly strong performance. This sector’s growth is significant because it often serves as a leading indicator of consumer spending trends and overall economic vitality. The retail sector’s expansion suggests that household consumption, which typically represents a substantial portion of GDP in emerging markets, is recovering strength and supporting broader economic growth.

The manufacturing sector also contributed positively to the overall PMI reading, with firms reporting increased production levels to meet rising orders. Manufacturing growth is especially important for Kenya’s economic diversification efforts and its aspirations to become a regional manufacturing hub within the East African Community.

The services sector, which encompasses a wide range of activities from financial services to hospitality and professional services, similarly demonstrated growth momentum. This is particularly noteworthy given that services typically account for a substantial share of Kenya’s economic output and employment.

Procurement Activity Rebounds

Reflecting growing business confidence and improving demand conditions, Kenyan firms increased their purchasing activity in October for the first time since April. This rebound in input procurement represents a significant shift from the cautious approach that had characterized business behavior during mid-2025 when political and economic uncertainties prompted companies to limit inventory accumulation and reduce exposure to potential demand shocks.

The resumption of purchasing activity indicates that firms are now confident enough in their sales prospects to invest in building inventory levels and ensuring adequate input availability to meet anticipated customer orders. This forward-looking behavior suggests that businesses expect the current positive demand environment to persist in coming months, providing a foundation for sustained economic expansion.

The increase in procurement activity has important multiplier effects throughout Kenya’s economy. As businesses increase purchases from suppliers, they generate additional demand that supports employment and investment decisions among upstream producers and service providers, creating positive feedback loops that amplify initial growth impulses.

Supply Chain Improvements and Vendor Competition

The October survey revealed continued improvements in supply chain efficiency, with lead times—the period between ordering inputs and receiving them—shortening for the ninth consecutive month. This sustained trend of supply chain optimization reflects several underlying factors that have enhanced the operating environment for Kenyan businesses.

Panelists participating in the survey frequently attributed efficiency gains to subdued input demand over recent months, which had reduced pressure on suppliers and logistics networks. With suppliers facing less intense demand, they were able to process orders more quickly and deliver goods more promptly, reducing the working capital that businesses must tie up in awaiting deliveries.

Additionally, increased vendor competition has emerged as a factor driving faster delivery times and potentially more favorable terms for purchasing firms. As suppliers compete for business in an environment where demand had been constrained, they have incentives to differentiate themselves through superior service, faster delivery, and competitive pricing. This competitive dynamic benefits purchasing firms through improved operational efficiency and potentially lower procurement costs.

However, the pace of supply chain improvement moderated somewhat from September’s four-year high, suggesting that the most dramatic gains in efficiency may have already been captured. As demand strengthens and purchasing activity increases, supply chains may face renewed pressure that could slow further improvements in delivery times.

Employment Trends and Capacity Utilization

While output and demand showed strong growth in October, employment trends presented a more nuanced picture. Kenyan businesses reported some initiatives to enhance workforce capacity, but the pace of job creation remained only marginal. This relatively muted employment response to strong output growth suggests several possible dynamics at play in Kenya’s labor market.

First, firms may be meeting increased demand initially through improved productivity and fuller utilization of existing workforce capacity rather than immediately expanding headcount. After periods of economic uncertainty, businesses often prefer to maximize output from current staffing levels before committing to hiring additional workers, which represents a longer-term fixed cost commitment.

Second, labor market dynamics may reflect ongoing adjustments in workforce composition and skill requirements. As Kenyan businesses modernize operations and adopt new technologies, they may require different skill profiles than were prevalent in earlier periods, leading to a lag between output expansion and employment growth as firms search for workers with appropriate capabilities.

Third, some firms may be using temporary or contract arrangements to add capacity without increasing permanent employment, a strategy that provides operational flexibility amid continuing economic uncertainties.

The relatively stable employment situation has important implications for household incomes and consumer spending power. While strong output growth is positive for business revenues and GDP, broader-based employment growth would more effectively translate economic expansion into improved living standards for Kenyan households.

Inflation Dynamics and Price Pressures

One of the most encouraging aspects of October’s economic data was the continued moderation in price pressures, with input costs rising only marginally and at the slowest pace recorded in thirteen months. This inflation moderation represents a significant positive development for both businesses and consumers after extended periods of elevated price increases that strained household budgets and business margins.

The overall rate of input price inflation slowed notably, with both purchase prices and staff costs increasing at more subdued rates than in September. This broad-based moderation in cost pressures suggests that some of the factors that had driven rapid price increases in previous periods—including supply chain disruptions, currency depreciation, and elevated global commodity prices—have begun to dissipate.

When businesses did report cost increases, they primarily cited a combination of rising import prices and higher taxes, including increases in Value Added Tax and fuel duties. These factors reflect both external economic conditions—such as global energy prices and exchange rate movements—and domestic fiscal policy decisions aimed at enhancing government revenue collection.

The moderation in input cost inflation provided businesses with greater flexibility in managing their pricing strategies. Output prices also increased in October, but the rate of growth was similarly modest, indicating that firms were not aggressively passing cost increases through to customers. Notably, the wholesale and retail sector was the only one to experience a noticeable uptick in output price inflation.

Several survey participants mentioned offering discounts and promotional pricing to attract customers as economic activity improved. This competitive pricing behavior suggests that while demand conditions have strengthened, businesses remain cognizant of consumer price sensitivity and the need to offer attractive value propositions in order to capture sales in a recovering but still price-conscious market.

One decision can change your entire career. Take that step with our Online courses in ACCA, HESI A2, ATI TEAS 7, HESI EXIT, NCLEX-RN, NCLEX-PN, and Financial Literacy. Join Serrari Ed and start building your brighter future today.

Inventory Management Strategies

With purchasing activity increasing and delivery times continuing to improve, Kenyan firms were able to expand their input inventories during October. This inventory accumulation represents a strategic shift from the inventory drawdown that had characterized earlier periods when businesses sought to minimize working capital commitments amid demand uncertainties.

The decision to build inventories reflects business confidence in sustained demand growth and represents a form of investment in operational capacity. Adequate inventory levels allow firms to respond quickly to customer orders without experiencing stockouts that could result in lost sales or damaged customer relationships. Additionally, building inventories when supply chains are functioning efficiently and input prices are moderating can provide businesses with cost advantages if conditions tighten in future periods.

However, inventory management requires careful calibration. Excessive inventory accumulation ties up working capital and creates risks if demand fails to materialize as expected or if product specifications change. The measured pace of inventory building suggested by the October PMI data indicates that Kenyan firms are approaching capacity expansion prudently rather than over-committing based on overly optimistic demand projections.

Forward-Looking Expectations and Business Confidence

While current business conditions showed strong improvement in October, forward-looking expectations presented a somewhat more cautious picture. Output expectations dipped to a four-month low, though they remained among the strongest recorded since early 2023, suggesting that while businesses are optimistic about future prospects, their confidence is not unbounded.

According to S&P Global, exactly 20% of survey respondents forecasted an increase in business activity by October 2026, while the remaining 80% maintained a neutral outlook for the private sector. This distribution of expectations suggests measured optimism rather than euphoria, with most firms anticipating stable conditions rather than dramatic improvements or deteriorations.

Several factors may explain this tempered forward outlook despite strong current performance. First, businesses may remain cognizant of potential external shocks, including global economic uncertainties, geopolitical tensions, and climate-related risks that could disrupt agricultural production and broader economic activity in Kenya.

Second, domestic policy uncertainties, including the trajectory of fiscal policy and tax measures, may influence business confidence. While the government faces pressure to enhance revenue collection to meet debt obligations and fund public services, businesses remain concerned about the potential impact of additional tax burdens on consumer demand and business profitability.

Third, upcoming electoral cycles and political developments may create uncertainties that cause businesses to adopt cautious stances regarding major investment and expansion decisions until political trajectories become clearer.

Expert Analysis and Economic Implications

Christopher Legilisho, Economist at Standard Bank, provided important context for interpreting the October PMI results. He noted that Kenya’s private sector experienced sharp increases in both output and new orders as conditions improved for consumers and firms benefited from softer inflation. This combination of strengthening demand and moderating cost pressures creates an favorable environment for sustainable business expansion.

Legilisho highlighted that firms ramped up purchasing quantities and increased inventory levels in anticipation of higher consumer demand, demonstrating forward-looking confidence in the durability of current growth trends. The faster deliveries reported by firms reflect both increased supply chain efficiency and intensifying vendor competition, factors that enhance operational effectiveness and potentially reduce costs for purchasing companies.

However, Legilisho also noted that firms expressed less optimism about future output conditions compared to recent months, suggesting a degree of caution despite current strong performance. This measured outlook may reflect ongoing uncertainties about global economic conditions, domestic policy directions, or seasonal factors affecting different sectors.

Regarding employment, Legilisho observed that workforce levels remained stable in October for most firms as they maintained existing staffing while clearing backlogs of outstanding orders. This suggests that businesses are meeting increased demand initially through productivity improvements and fuller capacity utilization rather than immediate workforce expansion.

On pricing dynamics, Legilisho emphasized that indicators were soft in October, with input prices, purchase prices, staff costs, and output prices all increasing only modestly. These low price pressures carry important implications for monetary policy, as they suggest that while output conditions have improved substantially, the expansion is not currently generating demand-driven inflation that would necessitate tighter policy responses from the Central Bank of Kenya.

Broader Economic Context and Recovery Trajectory

Kenya’s strong October PMI performance occurs against a backdrop of broader economic adjustments and recovery efforts following a challenging 2024 and early 2025 period. The country faced significant headwinds including elevated inflation that eroded purchasing power, currency depreciation that increased import costs, and political tensions that occasionally disrupted business activity and investor confidence.

The Central Bank of Kenya has implemented various policy measures aimed at stabilizing the macroeconomic environment, including interest rate adjustments designed to anchor inflation expectations while supporting economic growth. The moderation in inflation observed in the October PMI data suggests that these policy efforts are gaining traction and creating conditions conducive to sustainable expansion.

Additionally, Kenya has been working to enhance its investment climate and attract foreign direct investment that can supplement domestic savings in financing development priorities. Improved business conditions as reflected in the PMI data should enhance Kenya’s attractiveness to international investors by demonstrating economic resilience and growth potential.

Sector-Specific Dynamics and Opportunities

The broad-based nature of October’s private sector expansion creates opportunities across multiple dimensions of Kenya’s economy. In manufacturing, continued output growth could support Kenya’s ambitions to increase its role as a regional production hub, leveraging advantages including relatively developed infrastructure, a large domestic market, and preferential trade access to regional and international markets through agreements like the African Continental Free Trade Area.

In the services sector, growth in areas such as financial services, telecommunications, and professional services can enhance productivity across the economy by providing critical enabling services that support business operations. Kenya’s well-developed financial sector and mobile money ecosystem provide foundations for continued innovation and expansion in fintech and related services.

The agricultural sector, while not specifically broken out in the PMI report, remains critical to Kenya’s economy as a source of employment, export earnings, and food security. Improved overall economic conditions and supply chain efficiency can benefit agricultural producers through better access to inputs, enhanced market linkages, and more stable price environments.

Challenges and Risks to Sustained Growth

Despite the encouraging October PMI results, Kenya’s private sector faces ongoing challenges that could affect future performance. Exchange rate volatility remains a concern, particularly for businesses that rely on imported inputs or have foreign currency-denominated obligations. While inflation has moderated, the Kenyan shilling remains subject to pressures from global capital flows and domestic economic conditions.

Infrastructure constraints, including power reliability and transportation networks, continue to affect business operating costs and efficiency in some regions. While Kenya has made significant investments in infrastructure development, including major projects in energy, roads, and ports, continued improvements are necessary to fully support private sector expansion.

Access to affordable financing remains a challenge for some businesses, particularly small and medium enterprises that may lack collateral or credit histories that satisfy traditional lending criteria. While Kenya’s financial sector is relatively developed, expanding access to credit for productive investments remains an ongoing priority.

Climate variability and environmental risks pose challenges, particularly for agricultural activities and businesses dependent on reliable water and energy supplies. Kenya’s vulnerability to drought and other climate-related shocks necessitates continued investment in resilience-building measures including water storage, renewable energy, and climate-smart agricultural practices.

Conclusion and Outlook

Kenya’s private sector performance in October, as captured by the PMI reaching 52.5—the highest since February 2022—represents a significant positive development for East Africa’s largest economy. The broad-based expansion across sectors, coupled with moderating inflation and improving supply chains, creates foundations for sustained economic growth that can enhance living standards and support employment generation.

The combination of strong current performance and measured forward-looking expectations suggests that Kenyan businesses recognize both opportunities and challenges in the economic environment. While demand conditions have improved notably and cost pressures have moderated, firms remain attentive to potential risks including policy uncertainties, external economic shocks, and structural constraints that could affect future performance.

For policymakers, the October PMI data provides encouraging evidence that recent economic management efforts are yielding positive results. The challenge will be to maintain this momentum through continued policy discipline, strategic investments in enabling infrastructure, and measures that enhance the business environment while ensuring that economic gains translate into broad-based improvements in living standards for Kenyan households.

As Kenya moves forward, the private sector’s demonstrated resilience and growth capacity position the country favorably to capitalize on emerging opportunities in regional and global markets while navigating ongoing challenges in the evolving economic landscape.

Ready to take your career to the next level? Join our Online courses: ACCA, HESI A2, ATI TEAS 7 , HESI EXIT  , NCLEX – RN and NCLEX – PN, Financial Literacy!🌟 Dive into a world of opportunities and empower yourself for success. Explore more at Serrari Ed and start your exciting journey today! ✨

Track GDP, Inflation and Central Bank rates for top African markets with Serrari’s comparator tool.

See today’s Treasury bonds and Money market funds movement across financial service providers in Kenya, using Serrari’s comparator tools.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

10th November, 2025