Paul Arithi 
- Stanbic PMI for June was upbeat on signs of a recovery after three months of weakness
- Rising fuel prices drive historic uptick in output charges
- Order books edge higher, but output continues to fall
- Strongest outlook for future activity since February 2023
The Standard Bank Kenya PMI® signalled the quickest increase in private sector output charges in the survey’s history during June.
The uplift was widely associated with rising fuel levies, which led to another pick up in total input cost inflation.Rising business expenses also contributed to a reduction in output, even as customer orders showed signs of revival.
Despite these challenges,Kenyan firms were the most confident about future activity for almost three-and-a-half years in June, as an increase in sales boosted sentiment and led to higher backlogs, fresh job creation and restocking efforts.
Combined, these signals led the headline Kenya Purchasing Managers’ IndexTM (PMI®) to rise from 46.6 in May to the neutral mark of 50.0 in June.
The latest reading therefore indicated that operating conditions stabilised in June,following contractions in each of the past Stanbic Bank Kenya PMI on the three months.
Business activity remained a negative influence on operating conditions in June, as the latest survey data signalled
a downturn in output for the fourth month running.
Many panellists continued to face weak client numbers, whilst some noted supplier capacity cuts and reluctance to purchase inputs linked to rising cost burdens and limited cash flow.
The pace at which output contracted was less steep than that seen in May, but marked nonetheless.
Positively, new order inflows returned to growth territory for the first time since February, albeit with only a modest rise
overall.
Firms reporting a boost to sales often suggested these had been earned through customer referrals, marketing campaigns and business growth initiatives.
This mismatch between output and new orders in Kenya’s private sector resulted in a solid increase in unfinished business.
Panellists also suggested that vendor delays and higher input prices contributed to the rise.
On the former, June data signalled the greatest lengthening of overall supplier delivery times since April 2020, as firms noted that product shortages and higher fuel prices had often made vendors reluctant to deliver goods until transport capacity was full.
Around 41% of monitored companies reported an increase in total input costs in June, pushing the rate of overall
cost inflation to its highest level since November 2023.
As well as the impact of fuel prices, panellists mentioned higher costs for items such as foodstuff, paper,
IT equipment and construction materials.
The marked surge in business costs underscored a record mark-up in average prices charged at Kenyan firms in June, which culminated a sharp acceleration
Christopher Legilisho, Economist at Standard Bank commented:
“The Stanbic PMI for June was upbeat on signs of a recovery after three months of weakness. Firms’ new orders grew due to robust sales volumes.
However, output conditions remained subdued on concerns of soft client demand and rising price pressures.
Still, firms are more confident about future output expectations due to advertising, the entrenchment of technology, and expectations of lower fuel costs.
“The deterioration in backlogs and supplier delivery times suggests that supply-side constraints are limiting firms’ ability to convert stronger orders into output.
Inventories increased in June due to concerns about shortages but also due to higher expectations of growth.
“Most concerningly, input and output prices accelerated sharply, reflecting higher fuel and raw material costs and a stronger pass-through to consumers.
This has been keeping margin pressure elevated; further, it implies that the current price shock may last longer than the 2022 oil-price episode.
Still, as international oil prices have been declining, there may be reprieve for firms in time.”
Output
The seasonally adjusted Output Index remained in sub-50.0 territory in June,signalling a contraction in output for the fourth month in a row.
Despite easing slightly from May, the rate of decline was strong overall.
Although some survey members benefitted from an increase in new orders,there were frequent mentions of poor client turnouts and higher cost pressures.
New orders
June data pointed to a modest recovery in sales volumes received by Kenyan businesses.The total volume of incoming
work rose for the first time since February.
A number of firms reportedly gained new clients through referrals, marketing and product expansions,although cost pressures were still cited as a major growth dampener.
Business expectations;
The Future Output Index rose to its highest level since February 2023 in June. Approximately a third of surveyed businesses (33%) anticipated a rise in output over the next 12 months, whereas just 1% predicted
a fall.
Panellists highlighted a number of growth drivers, including entry to new domestic and foreign markets, investment
in advertising strategies and tech adoption.Some businesses pinned hopes on a lowering of fuel prices.
Employment and capacity;
Employment
Kenyan companies increased their employment numbers at a moderate and above-average pace at the end of the
second quarter.
In many cases, job creation was linked to an uplift in new work and renewed capacity pressures.The increase in employment followed a slight fall in May.
Backlogs of work
For only the second time in more than a year, backlogs of work increased during June. Moreover, the respective seasonally adjusted index climbed to its highest level since October 2019 and indicated a solid rate of expansion.
Some panellists associated this with vendor delays, while others linked the rise to expensive input prices and output
constraints.
Purchasing and inventories;
Quantity of purchases
Firms in Kenya pointed to a marginal fall in purchasing quantities in June and one that was slightly faster compared to that seen in May.
The contraction was centred on the wholesale & retail and agriculture segments.
Survey respondents that lowered their purchases broadly related this to rising input prices and greater inflationary pressures in general, as well as a lingering effect from the recent spell of weak demand.
Suppliers’ delivery times
The latest survey data signalled an increase in average input delivery times for the first time since January 2025. In some cases, rising transport costs led suppliers to cut back on delivery cadence.
Panellists also noted that product scarcity had caused delays.
Although marginal, the decline in supplier performance was the strongest seen since April 2020.
Stocks of purchases
Kenyan businesses added to their inventories of purchased items for the third consecutive month in June, which survey comments often linked to improved growth predictions
and concerns over shortages.
While the rate of expansion was the joint-fastest in 2026 to-date (alongside April), it remained much softer than the series trend, mostly due to reduced purchasing and greater cost worries.
Prices;
Input prices
Overall input price inflation remained on an upwards trend in June, accelerating for the fourth straight month to its highest level in just over two-and-a-half years.
Notably, nearly 41% of the survey panel stated that their costs had risen since the prior month, far higher than the 4% of respondents that saw a decline.
Out of the five main sectors, cost pressures were the most marked in construction.
Purchase prices
Rising fuel prices were often seen as a key inflation driver in June, as firms commonly mentioned having to pay more for purchases as a result.
Consequently, the seasonally adjusted Purchase Prices Index rose for the fourth month in a row to its highest level since
November 2023.
Staff costs
The vast majority of survey respondents (97%) reported no change in their labour expenses over the course of June. Afteradjusting for seasonal variation, the Staff Costs Index thereby signalled little movement in wage bills across the private sector economy.
Output prices
In line with the trend for total input costs, Kenyan businesses reported a sharper increase in selling charges at the end of the second quarter.In fact, the uplift was the quickest recorded in the survey’s history (since January 2014).
Around 25% of firms lifted their fees (versus 2% cutting them), which they mainly attributed to the pass-
through of increased fuel costs and higher raw material purchase prices.
