Kenya’s private sector activity contracted for a second consecutive month in April as record-high fuel prices drove up operating costs and stifled consumer spending across the country, Stanbic bank said on Wednesday.
The Stanbic Bank Purchasing Managers’ Index (PMI) rose to 49.4 in April from 47.7 in March. While the pace of decline slowed, any reading below 50.0 indicates a contraction.
Middle East geopolitical tensions triggered a mid-April fuel price hike of up to 24.2%. This surge forced businesses to pass higher transport and logistics costs directly to their customers.
Consumer demand weakened as a result, particularly in the agriculture and retail sectors. High inflation, which hit a two-year high of 5.6% in April, further eroded household purchasing power.
Input cost inflation reached its highest level since late 2023. About 18% of surveyed firms reported rising expenses, though many increased inventory levels to hedge against future supply disruptions.
“Concerns about rising costs, tied to higher transport costs, and the ability to secure supplies, especially from the Middle East and Asia, weighed on output and new orders in sectors such as wholesale and retail trade, agriculture, and services, Christopher Legilisho, Economist at Standard Bank commented.
Despite the downturn, employment grew for the 15th straight month. Companies continued hiring casual workers to support ongoing expansion projects and product diversification efforts amidst the challenging environment.
The government recently cut VAT on petroleum products to 13% and deployed 6.2 billion shillings in subsidies. However, analysts warn that persistent energy price volatility remains a significant risk.
The East African tea and coffee exporter maintains a 2026 growth forecast of 4.9%. Achievement of this target depends heavily on the stabilization of global oil markets and regional trade routes.
