Kenyan private sector slips back into contraction amid Middle East fallout

In Kenya, private sector activity contracted in March for the first time since August 2025. Companies are reporting lower output and fewer new orders, against a backdrop of weaker purchasing power and disruptions linked to the war in the Middle East.

According to Stanbic Bank Kenya’s PMI, the gauge fell to 47.7 in March from 50.4 in February, marking a fourth consecutive monthly decline. Any reading below 50 points to a deterioration in business conditions.

The survey, carried out between 12 and 27 March, highlights reduced money circulation, tighter household budgets, rising fuel and transport costs, as well as logistical bottlenecks slowing deliveries.

Order books are shrinking for the first time in seven months, forcing firms to scale back production. Input costs are rising at the fastest pace in more than two years, driven by higher taxes, more expensive fuel and increased shipping charges. But with weak demand and tougher competition, businesses are struggling to pass these higher costs on to customers.

To protect their cash flow, Kenyan companies are running leaner inventories. Job growth is only marginal, at its lowest pace since October 2025, while backlogs of work are falling at the sharpest rate in nearly six years.

Despite the slowdown, business sentiment remains relatively firm: just over a fifth of respondents expect growth over the next 12 months, supported by expansion plans, more advertising, stronger online marketing, a broader product range and investment in capacity and talent.