Kenya recorded its highest level of growth in ten months due to a stronger improvement in business conditions, even as optimism for growth remains at a minimum.
According to the latest Stanbic Kenya PMI Report, Kenya recorded a reading of 51.7 in March, up from 50.6 in February, above the average series of 51.2. Readings above 50.0 signal an improvement in business conditions, while readings below 50.0 indicate a deterioration.
Key trends observed in March included accelerated growth in activity and demand, as strengthening demand conditions led to a solid increase in new orders across the private sector. Also, the rate of growth in new business inflows accelerated to its fastest in just over two years.
This was attributed to firms gaining new customers and seeing positive impacts from marketing and favourable weather conditions. However, some firms found it difficult to boost sales due to inflationary and cash flow pressures among customers.
The uplift in sales supported a faster expansion in business activity across the private sector in March. Output increased at the quickest pace since May 2024, with firms generally indicating that they were able to boost activity to match order volumes.
Higher output was largely attributed to increased sales and new customer referrals. The wholesale & retail and services sectors registered particularly sharp expansions, while manufacturing was the only monitored category to post a decline.
The growth also reflected overall stability in private sector employment, with employment levels rising for the second consecutive month. However, similar to February, the increase in staff numbers remained mild.
Additionally, the growth rate led to a recovery in purchasing activity in March, following a decline in February—the first in seven months. Moreover, the rate of expansion was the fastest recorded in two and a half years, with firms attributing the higher purchases to increased customer demand.
Additionally, pricing pressures were at their softest in five months due to restrained increases in input and purchase prices. However, the latest uplift was the weakest recorded in five months and modest overall.
While some businesses opted to raise their selling prices to pass on higher purchasing costs, others offered discounts to try and attract new customers.
This growth was observed despite the private sector recording the lowest degree of confidence in future growth since 2014. Only two per cent of monitored firms responded with a positive forecast for business activity over the next 12 months. The ‘positive’ firms' panellists highlighted plans to open new outlets, add to their products and services, and rebrand.
“The March Kenya PMI shows a private sector with faster growth in output and new orders, assisted by increased customers, good weather, and sustained marketing. However, Kenyan businesses remain uncertain about future output expectations,” noted Christopher Legilisho, an economist.
