Paul Arithi 
Kenya finishes 2025 with another solid expansion in private sector business conditions
- Firms report marked rises in activity, sales and purchases
- Strongest rate of employment growth in over six years
- Inflationary pressures reaccelerate from November low
Kenya’s private sector economy recorded another solid upturn in the final month of 2025, as business activity was again boosted by a robust increase in customer demand and mild cost pressures.
Strong growth momentum led companies to expand their employment levels at the fastest rate since November 2019.
Kenyan firms also reported a sharp rise in purchasing activity in December, indicating greater efforts to build stocks,
secure market positions and capitalise on healthy supply chains.
Expectations for future output meanwhile improved, despite a quicker uptick in the rate of input price inflation.
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 headline PMI stood at 53.7 in December, signalling a robust upturn in the health of the non-oil sector. Notably,
along with November’s reading of 55.0, the last two monthly PMI figures are the highest recorded in four years.
Business output increased at a sharp rate as 2025 drew to an end, with firms often relating an expansion in activity to rising order book volumes.
Whilst not as substantial as that recorded in November, which was the strongest in over five years, the rate of output growth during December was still historically elevated.
Kenyan firms also reported a strong increase in sales volumes in December. Anecdotal survey reports pointed to several factors enhancing growth, such as improved tourism and demand in general, greater advertising and passing on subdued cost pressures to customers via more affordable prices.
Overall, the December PMI data indicated robust efforts by Kenyan companies to build capacity, both to meet existing orders and in strong anticipation of future growth.
Staffing levels increased, with the pace of expansion reaching the fastest seen since November 2019. Likewise, firms
raised their input purchases, marking a third consecutive month of growth.
Increased purchasing efforts coincided with a strong improvement in supply chain performance in December, as average lead times decreased to the greatest extent for more than four years.
Input costs faced by Kenyan companies rose at a solid pace in December, having reaccelerated from an 18-month low in November.
According to panel comments, costs typically rose due to greater tax burdens for some types of purchases, with some companies also citing higher fuel and materials prices.
The overall increase in input costs was the quickest recorded in four months, but remained much softer than the survey’s long-run trend.
In a similar fashion, average selling charges rose to the greatest extent since last July. Firms’ assessments towards the year ahead remained positive and even improved slightly compared to one month ago.
Qualitative feedback signalled that businesses expect output to grow in 2026 because of investment and diversification plans, staffing growth, product rebrands and increased advertising.
Christopher Legilisho, Economist at Standard Bank commented:
“The Stanbic Bank Kenya Purchasing Managers Index (PMI) stayed in expansion territory, albeit slower this month, implying still strong demand conditions are driving new orders, in turn lifting output in the private sector at the end of the year.
This suggests that year-end related overall output will likely turn out healthy. Notably, firms in most sectors highlighted increased employment, especially the construction sector, reflecting efforts by the authorities to stimulate activity.
Furthermore, firms reportedly increased their input purchases as well as inventories to facilitate faster deliveries and maintain competitiveness in response to improving conditions.
“There was an increase in input prices and output prices linked to higher customer demand in December.
Purchase prices increased amid lingering concerns about taxes, production costs and other factors.
Wage costs increased by a small fraction but well below the historical trend.
Overall, this suggests that we could see higher inflation in the coming months from improving consumer demand as firms become more confident.”
Business expectations
Future Output
Index growth expected over next 12 months
The Future Output Index ticked up to a three-month high in December, signalling a solid degree of business confidence in the year ahead outlook.
Approximately a fifth of surveyed firms were hopeful for an increase in output, with mentions of business diversification plans, new marketing avenues, improved skills bases, product rebrands and investment growth buoying expectations.
The latest data extended a trend of robust confidence throughout the second half of 2025 that has been much stronger than seen earlier in the year and in late-2024.
Output
Business activity across Kenya remained in expansion mode at the end of 2025. Despite falling back from November’s over five-year high, the rate of increase in output was sharp overall and the second-quickest since late- 2020.
Firms across most monitored sectors reported substantive upturns, although there was a fresh decline among wholesale & retail companies.
Where output rose, reports suggested that an increase in new order intakes was the primary cause.
New orders
Private sector sales volumes increased for the fourth month in a row in December.The uplift was still marked, albeit slightly softer than that seen in November.
Panellists highlighted a range of factors leading to higher sales, including advertisements, affordable prices, better cash flow and increased travel.
Employment
Amid sharply increasing new business, firms in Kenya added to their workforces at a historically strong pace in December.
In fact, when adjusted for seasonal variation, the Employment Index rose to its highest point in just over six years. Job creation was widespread across sectors, but easily the most pronounced in construction.
Backlogs of work
An additional rise in staff capacity enabled Kenyan businesses to reduce their outstanding business further at the end of the year.
The level of work-in-hand fell modestly, with the rate of depletion quickening slightly from November.Backlogs of work have now decreased for seven straight months, marking the longest sequence of decline in the survey data for over 11 years.
Purchasing and inventories
Quantity of purchases
December survey data revealed another sharp increase in the volume of inputs bought by private sector companies in Kenya.
The monthly expansion was the third in a row and, similar to the trends observed in output and new orders, the second-fastest in over five years. Survey panellists tended to strengthen their purchases because of higher demand volumes.
‘Suppliers’ delivery times
There was a notable improvement in supplierdelivery times at the end of the year. After adjusting for seasonal factors, the respective index climbed to its highest level since September 2021, indicating a solid decrease in the time taken for inputs to arrive at Kenyan businesses.
Anecdotal reports highlighted a competitive environment among vendors that often made them eager to deliver items quicker to win business.
Stocks of purchases
Stocks of purchases increased in December for the fifth month in a row. However, the rate of growth lost momentum from November and was modest.
Although many firms reportedly expanded their inventories to meet higher demand and avoid shortages, there were
some mentions of businesses holding less to avoid retaining dead stocks.
Prices;
Input prices
Kenyan businesses reported a solid increase in their input prices in December, marking an acceleration in cost pressures from the 18-month low recorded in November.
Input prices tended to rise due to an uplift in purchase costs, as wage inflation remained relatively mild.That said, despite quickening, the overall rate of input price inflation was noticeably softer than the series’ long-run trend.
Purchase prices
Purchase prices rose at the quickest rate for three months during December. Survey panellists mainly attributed this to rising tax burdens, although some commented on higher production and fuel costs, and supplier price hikes linked to rising demand.
Purchase prices rose in most sectors, the exception being agriculture where a slight drop was observed.
Staff costs
Latest survey data signalled only a fractional increase in staff pay over the course of December. Nearly all monitored companies reported no change in their wage costs during the month. Where an increase was noted, firms linked this to higher living costs.
Output prices
Firms in Kenya increased their output prices at the end of the year. Whilst modest in general, the rate of increase accelerated to a five-month high, although sector data signalled that this was mainly down to higher charges at manufacturers.
Prices also rose in the services and construction sectors, but declined elsewhere. Qualitative evidence signalled that a boost in demand had often encouraged firms to raise their prices.
