Kenya PMI Falls to 49.7 as Activity Contracts

The reading matters because it points to an economy where demand is no longer the main problem. New orders rose for a third month, helped by bulk buying, more advertising and stronger private healthcare demand during public sector strikes, but companies said they could not secure enough inputs to meet that demand.

Input buying fell for a fourth consecutive month and at the fastest pace in just over a year, while stocks of purchases posted their sharpest drop in three-and-a-half years. That left backlogs of unfinished work rising at one of the strongest rates in more than five years, even as supplier delivery times shortened for the first time in three months.

The mismatch is a warning for growth and inflation. Firms are hiring more workers and confidence has improved to its strongest since February 2023, but production is still being capped by shortages of key materials and limited liquidity, leaving margins under pressure.

Cost inflation eased to its lowest since April, with output price increases at a four-month low, but fuel, transport and wage costs remain elevated. Stanbic economist Christopher Legilisho said moderating input and output price inflation may point to gradual disinflation, though rising wages are broadening price pressures and could keep underlying inflation sticky if firms keep passing on costs.

For investors, the data suggests Kenya’s recovery is fragile and uneven: stronger sales are supporting some sectors, but the lack of working capital and reliable supplies may delay any broad-based rebound in output. The key test in the months ahead is whether easing price pressure and better supply conditions let firms rebuild inventories before demand cools.