Players in Kenya’s private sector experienced an uptick in October for the first time in eight months, as a sharp rebound in new orders and a surge in business confidence lifted the Stanbic Bank Kenya Purchasing Managers’ Index to its highest level of 2026.

The headline PMI rose to 52.5 in October from 51.3 in September, according to survey data collected between October 12 and 28 by S&P Global. 

A reading above 50 signals an improvement in business conditions compared with the previous month. The index has now signalled expansion for two consecutive months.

October's upturn was underpinned by the fastest acceleration in new order growth in almost a year. Surveyed companies cited customer referrals, greater footfall and new contracts, with sales volumes rising for a fifth straight month.

Kenya's manufacturing industry recorded the quickest increases in both output and new orders among the five monitored sectors.

Business activity itself returned to growth for the first time since February, although the expansion was modest. Firms reported that cash-flow issues and concerns about inflation limited the pace of the recovery. Construction was the only sector to contract, according to Christopher Legilisho, economist at Stanbic Bank.

“Kenya’s Stanbic PMI improved markedly in October due to stronger output and sustained new orders activity, implying that demand conditions for the private sector aided the improvement,” Legilisho said, adding; “Improvements were broad-based across most sectors, with construction the only laggard.”

Expectations for future output climbed to their highest level since March 2020, with 51 per cent of firms anticipating higher activity over the coming year, up from 31 per cent in September. 

This optimism was linked to planned expansions, new products and services and investment in marketing campaigns. Economist Legilisho described the improvement in business confidence as “notable,” noting that the future output index had surged to a six-year high.

The brighter demand picture prompted firms to increase input purchases at the fastest pace since January, feeding through to the sharpest rise in stocks of purchases in exactly four years. 

Suppliers’ delivery times also shortened at the quickest rate since September 2021, with vendors reportedly more responsive amid heightened competition.

However, the survey pointed to mounting strain on operating capacity. Backlogs of outstanding business accumulated at the fastest rate in seven years, while employment rose for a fifth consecutive month but at the slowest pace of the current sequence. Just over a third of monitored firms reported an increase in total input costs in October, compared with 2 per cent reporting a fall.

“Backlogs accumulated at the fastest pace in seven years, while employment growth slowed to the weakest rate in the current five-month expansion, which implies that stronger demand is stretching operating capacity,” Legilisho explained.

During the month, cost pressures intensified sharply. Survey shows that input price inflation quickened to its fastest since November 2023, driven by higher fuel and transport costs, and edged above the recent high recorded in June. 

Selling prices

Many firms responded by raising selling prices at a quicker pace in an effort to protect margins, with the rate of output price inflation the second-fastest in three years, exceeded only by June.

Rising costs remain a key constraint on the recovery. Legilisho said October’s survey pointed to firmer demand and improved confidence, but that the rebound “remains constrained by price pressures, cash-flow difficulties and a modest hiring response.”

The data suggest Kenya’s private sector is emerging from a prolonged soft patch, supported by stronger customer demand and improved sentiment. But the combination of seven-year-high backlogs, slowing job creation and near three-year-high input inflation leaves the durability of the recovery in question, with firms yet to translate stronger sales into faster hiring or easing price pressures.

The Stanbic Bank Kenya PMI is compiled from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies, covering agriculture, mining, manufacturing, construction, wholesale, retail and services.

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