Kenya’s private sector slid into contraction in March for the first time in seven months, as geopolitical tensions in the Middle East and a sharp rise in domestic costs stifled new orders and production.
The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dropped to 47.7 in March, down from 50.4 in February. The figure fell below the neutral 50.0 threshold for the first time since August 2025, signaling a renewed downturn in the East African nation’s business environment.
According to the survey released Tuesday, the contraction was driven by a “double squeeze” of cooling demand and rising input prices. While most industries struggled, the wholesale and retail sectors remained the sole areas of expansion during the month.
The ongoing war in the Middle East emerged as a critical external headwind, disrupting global supply chains and driving up the cost of imported goods. Local businesses reported that higher transport costs and logistical delays linked to the conflict contributed to the sharpest rise in purchasing prices in over two years.
Domestically, firms faced an uphill battle as consumers pulled back on spending. Survey respondents cited higher taxes and limited cash circulation as primary reasons for a “solid decline” in new business volumes.
This drop in demand led many manufacturers and service providers to scale back production and maintain leaner inventories to preserve cash flow.
“The March data highlights a sudden loss of momentum,” the report noted, pointing out that output levels fell at the fastest rate since mid-2023.
Despite the immediate slump, some firms remained optimistic. Roughly 20% of surveyed businesses expect conditions to improve over the next 12 months, pinning their hopes on planned expansions and a potential stabilization of global energy prices.
However, for the immediate future, the combination of regional instability and high domestic operating costs continues to weigh heavily on the continent’s seventh-largest economy.
