Stanbic’s Purchasing Managers’ Index (PMI) dropped to 53.7 in December from the five-year high of 55.0 recorded in November, given this drop a reading above 50.0 still indicates a solid expansion in business conditions. The decline in the index was driven by several key factors like a slowdown in output and new order growth, reacceleration of inflationary pressures, decline in wholesale and retail activity and a waning inventory momentum.
According to the PMI, there was a reacceleration of input cost inflation in December, which had previously hit an 18-month low in November. Firms reported that higher costs were driven by greater tax burdens on certain purchases, rising fuel and material prices, and higher costs linked to increased customer demand. In response to this, the average selling charges rose to their highest level since July, as businesses passed these costs onto consumers.
Although most monitored sectors in the PMI reported upturns, the wholesale and retail sector experienced a decline in output during December. This sectoral weakness contrasted with the broad-based growth seen in November. The growth in stocks of purchases lost momentum compared to November. While firms continued to expand inventories to meet demand and avoid shortages, some businesses purposefully held less stock to avoid retaining dead stock.
Most business activities remained in expansion mode, but the pace was slower in comparison to the record highs of November. Private sector sales volumes increased for the fourth consecutive month, but the uplift was described as slightly softer than the previous month which directly contributed to the lower headline figure.
Performance of Key Areas of Focus in Stanbic’s PMI
There were several key areas where the Kenyan private sector not only maintained its momentum, but there saw significant improvements compared to November. While the headline PMI figure dropped, the employment index actually improved, reaching its highest point in just over six years with widespread hiring across most sectors, particularly in construction. Additionally, business confidence for the year ahead improved slightly, reaching a three-month high.
“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.” Christopher Legilisho, Economist at Standard Bank
After falling for three consecutive months, the future output index improved. Approximately 20% of surveyed firms expressed optimism regarding growth in 2026, citing investment plans, product rebrands, and business diversification. The Average supplier lead times decreased to the greatest extent in more than four years. This improvement was due to a competitive vendor environment where suppliers were eager to deliver quickly to secure business.
According to the PMI, private sector sales volumes increased for the fourth consecutive month. While the rate of growth was slightly softer than the record highs of November, the expansion remained robust and historically elevated. Staff costs remained consistently low in December, nearly all monitored companies reported no change in wage costs, mirroring November when over 99% of firms reported no change in salaries. Firms continued a trend of sharp increases in input purchases to meet demand and secure market positions, marking the third consecutive month of growth for this metric. Stocks of purchases increased for the fifth month in a row, though the pace of accumulation lost some momentum in December.
Also read: Kenya’s Annual Inflation Remains Steady at 4.5% in December 2025
