By: ThinkBusiness Africa
Kenya’s private sector maintained a trajectory of solid growth through the end of 2025, buoyed by resilient consumer demand and a historic surge in employment.
According to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI) released on Tuesday, business activity remained firmly in expansion territory despite a minor slowdown from the previous month’s record highs.
The headline PMI stood at 53.7 in December. While this represents a slight dip from November’s five-year high of 55.0, any reading above 50.0 indicates an improvement in business conditions.
The data suggests that the “festive season boost” coupled with stabilized economic fundamentals allowed Kenyan firms to close the year with significant momentum.
The standout feature of the December report was the aggressive pace of hiring. The Employment Index climbed to its highest level since November 2019, marking a six-year peak in job creation.
Hiring was broad-based but particularly pronounced in the construction and manufacturing sectors. Firms cited the need to clear backlogs and expand capacity to meet a steady influx of new orders.
Interestingly, despite the hiring spree, staff pay saw only a fractional increase. Most firms reported that wage costs remained stable, though those that did raise pay attributed it to higher living costs for their employees.
To keep up with demand, Kenyan businesses ramped up their purchasing activity and inventory holdings.
In a positive sign for logistics, supplier delivery times improved to their best levels since September 2021.
Shorter lead times allowed firms to fulfill orders faster and maintain a competitive edge during the high-demand holiday period.
As the East African country enters the new year, the outlook remains cautiously optimistic. Business expectations for 2026 are positive, with many firms citing plans for diversification, new product launches, and increased marketing.
However, the report also highlighted emerging headwinds. Input costs reaccelerated in December due to: increased tax burdens that took a toll on operating expenses.
Also, rising prices for essential inputs (fuel and material) began to squeeze margins.
Economists warn that while demand is currently absorbing these costs, inflationary pressures could firm up in the first quarter of 2026, potentially forcing businesses to pass these costs on to consumers through higher “output prices.”
Throughout 2025, the Central Bank of Kenya (CBK) began easing its monetary policy, from peak 11.25% in 2024 to 9% in 2025 marking a total 225 basis points reduction. By December, the impact of lower interest rates finally began to trickle down to the private sector.
For the first time in years, Small and Medium Enterprises (SMEs) are finding it more affordable to borrow for expansion. This explains the six-year hiring peak—companies are no longer just “surviving” but are actively investing in new staff and equipment.
