Stanbic Bank Kenya Purchasing Managers' Index (PMI) Report, July 2026
Kenya's private sector grows in July amid uplift in sales
Key findings
- Employment rises at fastest pace in 2026 so far
- Solid new order growth contrasts with decline in output
- Cost pressures remain elevated, but selling price inflation cools
Kenya's private sector returned to growth in July, marking a turning point after four months of stagnation or decline. The expansion was underpinned by the strongest increase in new orders since January, as businesses successfully attracted customers through referrals and marketing.
Positive momentum was nonetheless tempered by persistent operational challenges, including a contraction in output, supply chain disruptions, and elevated cost pressures. Despite this, Kenyan firms demonstrated greater confidence in their prospects, with employment expanding at the fastest pace so far this year, while overall business optimism surged to its highest since February 2023.
The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI® ). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.
For the first time since February, the Kenya PMI registered in expansion territory, increasing from 50.0 in June to 51.3 in July. The reading signalled a moderate improvement in the private sector's performance after several months of challenging conditions.
The survey revealed a notable divergence between demand and output. New work inflows expanded solidly and for the second consecutive month following a three-month decline, with growth accelerating to its quickest pace since January. Greater customer receipts were often attributed to client referrals, marketing efforts and new products and services.
However, output contracted for the fifth straight month, albeit at the slowest rate in this sequence. This mismatch partly reflected ongoing challenges with elevated inflationary pressures and their knock-on effects on liquidity, which prevented firms from fully capitalizing on stronger demand conditions.
The labour market showed encouraging signs in July, with private sector employment rising solidly. This was done predominantly through short-term hiring to address mounting workloads. Backlogs of work accumulated for the second successive month, albeit at a softer pace than June. The buildup of unfulfilled orders was attributed both to the output-demand mismatch and delays in receiving imported components.
Overall input cost inflation remained elevated in July, cooling only marginally from June's 31-month peak. Approximately 37% of companies reported higher operating expenses, driven primarily by surging transportation costs, elevated fuel prices and material shortages stemming from the Middle East conflict. However, selling price inflation moderated from June's record high to its slowest pace since April, as only 15% of firms raised their charges, reflecting concerns about maintaining profit margins in a price-sensitive market.
Meanwhile, Kenyan businesses saw a decline in supplier performance for the second straight month, with delivery times lengthening slightly due to input shortages and rising costs. This prompted mixed inventory and purchasing strategies. Some firms increased stocks to buffer against shortages and meet stronger demand, while others reduced holdings to preserve capital and cut costs.
Future expectations brightened in July, with overall sentiment rising to its highest in just under three-and-a-half years. Positivity towards future output was supported by uplifted demand projections, business diversification plans, innovation, and supply chain optimisation efforts.
Comment
Commenting on the survey findings, Christopher Legilisho, Economist at Stanbic Bank said:
“Kenya’s PMI increased in July as conditions in the private sector improved. The headline gain was mainly driven by stronger new orders and modest short-term hiring, implying that firms are responding to pockets of demand and near-term workload pressures. However, output stayed subdued as elevated inflation, higher input costs and tight cash flows constrained production.
“At the same time, rising backlogs point to supply-side frictions, with delayed import deliveries limiting firms’ ability to convert new orders into actual output. Stocks purchased and inventories were broadly stable, implying that firms took divergent approaches to increasing orders: some drew down existing stocks, while others rebuilt inventories in anticipation of firmer demand.
“Output price inflation softened, even as input cost pressures remained elevated, implying that some firms absorbed costs to protect demand, while others remained focused on preserving margins.
“The July PMI suggests that demand is beginning to recover but cost pressures and logistics bottlenecks are still constraining activity.”
Download Current PMI Report