Kenya's economy is approaching stagnation, with February PMI declining

Investing.com – According to Kenya’s Stanbic Bank PMI data released on Wednesday, Kenya’s private sector economy nearly stagnated in February, with the Purchasing Managers’ Index (PMI) falling from 51.9 in January to 50.4, marking the third consecutive month of decline.

The February reading indicates only a slight improvement in business conditions, representing the slowest growth in the current six-month expansion sequence. The PMI measures the health of the private sector; readings above 50.0 indicate expansion, while those below 50.0 signal contraction.

Output in February was close to stagnation, with the seasonally adjusted index only slightly above the neutral level. About 33% of surveyed firms reported increased activity, while 32% reported a decline. Slowing growth of new orders and increased macroeconomic pressures are considered adverse factors.

Total sales in February increased, but at a weak pace—the slowest in the current six-month expansion. Many survey respondents reported that launching new products and services, expanding marketing efforts, and offering price promotions boosted sales. Other companies cited challenging economic conditions, low customer purchasing power, and intense competition.

Sector trends showed divergence, with construction, wholesale and retail, and services experiencing sales growth, while agriculture and manufacturing declined.

Slower growth in new business led to a reduced increase in procurement activity in February. Inventory levels grew at the slowest pace in seven months. Companies continued to benefit from shorter delivery times, although the pace of improvement slowed compared to January due to reports of busy suppliers, road congestion, and port delays.

Kenyan firms reported that workloads remain heavy, making it difficult to complete backlogs on time. After eight consecutive months of decline, unfinished work remained largely unchanged. This helped sustain hiring growth, with companies recruiting additional staff to reduce employee pressure.

February survey data showed the slowest overall increase in input costs in three months, with rises in procurement prices and wages both easing. Factors such as rising material prices and increased VAT were mentioned. As cost pressures eased and market conditions remained challenging, Kenyan companies raised their charges at the slowest rate since November 2025.

Kenyan firms remain optimistic about business prospects over the next 12 months. Slightly more than one-fifth of respondents expect output to increase, citing stronger demand, better economic conditions, planned product innovations, and larger marketing campaigns. Overall, optimism remains well above the average level for 2025.

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