Economic Momentum Builds on Stronger Demand

NAIROBI, Kenya – Kenya's private sector registered its most robust growth in 32 months during October 2025, driven by a significant increase in consumer demand and a slowdown in cost inflation. The Stanbic Bank Kenya Purchasing Managers’ Index (PMI), released on Wednesday, November 5, 2025, climbed to 52.5, up from 51.9 in September. This marks the second consecutive month of expansion, a positive indicator for an economy recovering from disruptions seen earlier in the year.

A PMI reading above 50.0 signifies an improvement in business conditions compared to the previous month. The October figure indicates a solid acceleration in economic activity and is the highest recorded since February 2022. According to the report compiled by S&P Global, the growth was broad-based, with all five monitored sectors—agriculture, manufacturing, services, construction, and retail—recording an upturn.

Sales and Output Drive Expansion

The primary drivers of the improved PMI reading were stronger sales and a corresponding rise in business output. Firms attributed the sharp increase in new orders to strengthening consumer demand, successful promotional pricing strategies, and the launch of new products. This surge in demand led to the fastest expansion in output since December 2021.

Encouraged by the sustained increase in sales, Kenyan companies expanded their purchasing activity for the first time since April 2025. This move to build up inventories suggests that businesses anticipate continued strong demand in the coming months. Furthermore, supplier delivery times shortened for the ninth consecutive month, pointing to greater efficiency and competition among vendors.

Inflationary Pressures Ease, but Caution Remains

A critical factor supporting the private sector's recovery was the easing of inflationary pressures. Input cost inflation slowed to its weakest level in 13 months, with both purchase prices and wage costs rising at a softer rate. Christopher Legilisho, an Economist at Standard Bank, noted that these low price pressures mean the improved output is not fueling demand-driven inflation. Firms that did report higher costs cited import prices and tax adjustments, including VAT and fuel duties.

Despite the positive performance, business confidence regarding the next 12 months saw a slight dip, falling to a four-month low. While many firms remain optimistic, citing hopes for improved sales and market expansion, a sense of caution prevails. This suggests that while current business conditions are favorable, long-term uncertainty about costs and consumer spending persists.

Job Creation Muted Amidst Recovery

While output and sales showed strong growth, the impact on employment was less pronounced. Job creation moderated to a mild pace in October, following a 28-month high in September. The report indicates that over 97 percent of surveyed firms reported no change in staffing levels. The marginal increase in hiring was linked to specific needs for new projects and to support higher sales volumes. This subdued employment growth suggests that companies are opting to enhance productivity with existing staff before committing to significant workforce expansion.

Implications for Kenya and East Africa

The strong PMI data provides a positive signal for Kenya's overall economic health heading into the final quarter of 2025. The rebound follows a period of contraction attributed to political protests and high inflation earlier in the year. The sustained growth, coupled with easing inflation, aligns with forecasts projecting Kenya's GDP to grow by approximately 5.2% to 5.4% in 2025. This recovery is crucial for investor confidence and macroeconomic stability.

Regionally, Kenya's economic performance is a key driver for East Africa. The African Development Bank projects the region's economy to expand by 5.7% in 2025, supported by infrastructure investment and a resilient services sector. A stable and growing Kenyan economy contributes significantly to this outlook, fostering intra-regional trade and investment. However, challenges such as high public debt and vulnerability to climate shocks remain significant risks for both Kenya and its neighbors.