Nairobi: Kenya's private sector faced additional challenges at the end of the first half of 2025, as the latest survey data highlighted contractions in both output and new orders for the second month running. Nevertheless, confidence about future activity strengthened and headcounts increased, while delivery times improved at the sharpest rate in almost two years.
According to Kenya News Agency, input prices and output charges both rose, with inflation rates ticking up from May. From the press statement, the Kenya PMI (Purchasing Managers' Index) fell further in June, registering below the 50.0 neutral mark for the second month running. At 48.6, down from 49.6 in May, the index signaled a modest decline in business conditions that was the sharpest in 11 months.
Specifically, weaker conditions were primarily driven by a solid contraction in business activity as survey respondents attributed the decline to lower customer spending, challenging economic conditions, and operational disruptions from protests. The downturn was compounded by a steeper fall in new orders, with over one-third of surveyed businesses reporting reduced sales intakes, compared to only 20 percent noting an expansion. In addition, firms consistently cited difficult conditions for clients as the main factor behind diminishing new business.
Despite these headwinds, Kenyan firms displayed increased optimism about future prospects, as sentiment levels reached their highest since May 2024. Approximately 18 percent of respondents expressed confidence in their ability to boost output over the next year, citing expectations of improved sales and market expansion. This optimism represented a marked improvement from the muted sentiment levels recorded earlier in the year.
On the other hand, employment conditions were also a bright spot, with staffing levels rising for the fifth consecutive month, albeit only marginally. Companies also reported improved vendor performance, with delivery times shortening to the greatest extent in nearly two years, driven by intense competition and reduced road congestion. However, some respondents noted delays due to port clearance issues and material shortages.
Furthermore, Kenyan firms showed increased stockpiling activity in June, with inventory levels rising at the strongest pace since October 2022, reflecting both optimistic demand expectations and strategic purchasing amid favourable material prices. However, purchasing activity continued to decline, with June recording the steepest contraction since July 2024, as businesses adjusted their buying patterns in response to softer sales trends.
On the price front, businesses faced greater cost pressures, with input price inflation accelerating to its highest level since January. Quicker inflation was primarily attributed to rising salary burdens, while purchase price inflation moderated to a four-month low. Meanwhile, output prices rose only modestly as companies balanced cost recovery with efforts to maintain their customer base amid challenging market conditions.