While hiring remains resilient, soaring costs and softening demand drag Kenya’s PMI down to 51.9, signaling a cautious start to 2026 for businesses.

The engine of Kenya’s economy is sputtering. The latest data from the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) paints a picture of a private sector that is growing, but with the handbrake on. The index dropped to 51.9 in January 2026, down from 53.7 in December, marking a four-month low. While the figure remains above the 50.0 threshold that separates expansion from contraction, the momentum is undeniably fading.

The slowdown is being driven by a softening in demand. After a festive season buoyed by consumer spending, reality has bitten hard in January. Businesses reported a "cautious start" to the year, with new orders rising at the weakest pace since September. High living costs continue to squeeze household wallets, forcing firms to temper their expectations.

The Silver Lining: Jobs

Despite the headwinds, there is a glimmer of hope in the labor market. Employment numbers rose for the 12th consecutive month, the longest uninterrupted streak of job creation since 2019. Companies are holding onto their staff, betting on a rebound later in the year.

• Sectoral Divide: Manufacturing remains the bright spot, recording strong gains in output. However, the construction and wholesale/retail sectors saw a decline in demand, highlighting the uneven nature of the recovery.
• Efficiency Gains: Firms reported a sharp reduction in backlogs, the fastest since April 2021, suggesting that businesses are becoming leaner and more efficient in their operations.

A Warning Sign

The PMI report serves as a warning light on the dashboard. "Growth eased due to a slower uplift in sales," the report noted. If demand continues to soften, the resilience in hiring may not last.

For policymakers in Nairobi, the message is clear: the private sector is resilient, but it is not invincible. Without measures to stimulate demand and lower the cost of doing business, the slow start to 2026 could turn into a prolonged stagnation.