Paul Arithi 
- Business activity almost stalls in February
- New orders rise at weakest rate for six months
- Inflationary pressures ease to three-month low
The Kenyan economy was close to stagnating in February, according to the Kenya PMI® which fell closer to its neutral
50.0 threshold.
Sales volumes across the private sector rose only marginally, leading firms to put the brake on output growth.
The expansion in purchasing activity also eased, supporting a weaker uptick in input prices and, in turn, prices
charged.
The headline figure derived from the survey is the Purchasing Managers’ IndexTM (PMI®). Readings above 50.0
signal an improvement in business conditions on the previous month, while readings below 50.0 show a
deterioration.
The Kenya PMI dropped for the third month in a row from 51.9 in January to 50.4 in February, indicating only a
marginal improvement in the health of the private sector economy.
Notably, the upturn was the slowest recorded in the current six-month growth sequence.
After going on a solid expansionary run over the past few months, output volumes were close to stalling during February, with the respective seasonally adjusted index recording just above its neutral value.
Around 33% of surveyed companies posted higher activity, whereas 32% noted a fall, with slowing new order growth and increased pressure from macroeconomic conditions seen as headwinds.
Although total sales volumes rose in February, the rate of growth was relatively subdued and the softest in
the current six-month sequence of expansion.
Many survey panellists reported that introducing new products and services, expanding marketing and offering price promotions had bolstered sales.
At the same time, other firms commented on difficult economic conditions, low client purchasing power and strong competition.
Sector trends were split, with construction, wholesale & retail and services registering sales growth, contrasting with downturns in agriculture and manufacturing.
The slowdown in new business growth prompted a smaller increase in purchasing activity over the course of February.
In turn, inventory levels rose at their slowest pace for seven months. While companies continued to benefit from shorter delivery times, the rate of improvement eased from January amid reports of busy vendors, road traffic and port congestion.
At the same time, Kenyan companies signalled that workloads were still busy and even struggled to complete backlogs on time.
Outstanding work levels were broadly unchanged after eight consecutive months of depletion.
This helped to sustain hiring growth, with firms taking on additional workforces to lower pressure on staff.
On prices, the February survey data indicated the slowest increase in overall input costs for three months, as purchase prices and staff wages both rose to lesser degrees.
Increases in material prices and the impact of higher VAT were nonetheless cited. With cost pressures easing and challenging market conditions, Kenyan companies raised their prices charged at the softest pace since last November.
Christopher Legilisho, Economist at Standard Bank commented: “The Stanbic Kenya PMI cooled in February as firms reported only modest surges in new orders and steady output.
While the outcome was still expansionary, some businesses were hampered by increased competition and a doubtful economy.
Although macroeconomic conditions have improved, the broader economy has not yet seen the benefits; sections of the private sector are still feeling the strain.
“However, expectations for the next 12-m held steady; about a fifth of firms in the survey remain optimistic about future output.
Further, job growth momentum was sustained, signaling underlying improvement in the private sector. Additionally,purchasing demand was resilient as both quantities purchased and inventories increased, though at a slower pace.
Input prices and purchase costs increased in February, attributable to higher operating costs and tax concerns, though improved supply of inputs helped to contain increases.
Output prices were up only slightly as discounts and increased competition restrained momentum.”
Finally, Kenyan firms stayed confident when assessing the 12-month outlook for business activity in February.
Just over a fifth of respondents expect output to rise, citing hopes of stronger demand, better economic conditions,
planned product innovation and greater marketing activity. Optimism remained much higher than the average seen in 2025.
Output;
Kenyan private sector firms reported hardly any change in their output volumes in the second month of 2026, as the respective seasonally adjusted index fell for a third month in succession and was only fractionally
above the 50.0 neutral value.
The slowdown came amid a weakening of customer order growth and macroeconomic pressures, according to survey members.
New orders;
Total new business received by Kenyan companies increased in February, but the upturn was only slight and the softest in the current six-month period of growth.
Respondents that saw order books improve commented on new products and services, marketing efforts and discounted prices.
However, other firms noted financial constraints on clients, poor economic conditions and increased competition.
Business expectations;
Business expectations were little-changed since January, with firms pointing to strong confidence in the year-ahead outlook for activity. About 21% of panellists predicted an expansion in their output over the next 12 months.
They pointed to anticipated improvements in demand and the broader economic environment as reasons to be
hopeful, whilst also citing organisational strategies such as increased marketing, product innovation and boosting customer referrals.
Employment;
Job numbers rose at Kenyan businesses, continuing the run of job creation that began in February 2025. Furthermore, the pace of growth accelerated from January and was stronger than the average seen in the aforementioned period. Where employment levels expanded, this was mainly attributed to an increase in workloads and new project starts.
Backlogs of work;
Backlog volumes were relatively flat in February, ending a prior eight-month run of decline. According to surveyed firms, incoming new orders had been challenging to complete.The manufacturing, wholesale & retail and services sectors saw an increase in outstanding business, while construction and agriculture registered falls.
Quantity of purchases;
The volume of inputs purchased by Kenyan private sector businesses increased during February. The rise was the fifth observed in as many months and solid, although the rate of growth slipped to the weakest since last October. Procurement efforts lost momentum due to a slower increase in new business, anecdotal reports showed.
Suppliers’ delivery times;
Kenyan companies saw wait times on their inputs decrease further over the course of February. However, the degree
of improvement was only modest, the least marked in four months, and much softer than the series long-run average. While several companies found that suppliers had sped up deliveries to retain strong client bases, busy
schedules, road traffic and port congestion were also cited.
Stocks of purchases;
Stocks of purchases rose only slightly across the private sector in February. This was signalled by the respective seasonally adjusted index falling to a level just above the 50.0 neutral mark, and the lowest for seven
months.Many firms reportedly opted to limit
Input prices;
Private sector firms across Kenya reported a solid increase in operating costs during February. Although dipping slightly from the previous month, the rate of inflation remained close to the average seen in 2025. Three out of the five monitored segments of the economy recorded higher costs than in January – agriculture, wholesale & retail and
services.
Purchase prices;
Purchase prices increased in February, but the rate of inflation slowed to a modest pace that was the lowest in three months. Where an uplift in purchase costs was recorded,panellists attributed this to increased demand for raw materials and higher VAT. However, supply gluts for some inputs helped to stem the rise.
Staff costs;
Although Kenyan firms saw a further rise in staffing costs midway through the opening quarter, the pace of inflation was slightly weaker than in the previous survey period and relatively muted. In fact, the respective seasonally adjusted index dropped to its lowest for three months and was only slightly above the 50.0 no-change threshold.
Output prices;
Firms in Kenya reported a smaller mark-up in output prices during February, with the rate of inflation softening to a three-month low.
While a number of businesses passed on cost rises to customers and increased their charges because of strong demand, others noted that discounts were offered due to softer purchase price pressures and high competition.
Agriculture, manufacturing and services recorded higher prices, while wholesale & retail and construction saw a fall.
