Kenya saw a moderate economic recovery in August, with companies increasing production levels for the first time in three months.

This comes after the effects of street protests led by Generation Z began to fade, according to Stanbic Bank Kenya’s Purchasing Management Index (PMI).
The survey measures monthly private sector activity such as production, new orders and employment.

The anti-financial law, the 2024 demonstrations, which later turned into a nationwide public push for governance reforms, had a significant impact on the private sector, as consumers refrained from spending decisions due to the unrest. The Stanbic survey shows that companies have largely resumed normal operations, with activity levels increasing for the first time since May 2024, and, for companies, new orders are also rising slightly.

This comes amid a relative lull following several reforms, including the withdrawal of a finance bill and the sacking of an entire cabinet, which caused street demonstrations to lose their intensity before dying down a few weeks ago. Moreover, despite increased purchases of inputs by companies, employment fell for the first time this year.

“Pressures on import prices and taxes led to the fastest rise in input costs since February, although overall inflationary pressures remained muted compared with the historical trend,” reads part of the PMI report released by the lender yesterday. It also noted that selling charges also rose at a moderate pace amid reports of price discounting.
Input prices rose for a third straight month, reflecting higher taxes, higher import prices and material shortages.

The headline Purchasing Managers’ Index rose from 43.1 in July to 50.6 in August, topping 50.0 unchanged for the first time since May, signaling renewed improvement in private-sector business conditions.

The pace of growth was moderate, the second fastest in more than a year and a half. Output rose in three of the five broad sectors covered by the survey, with renewed growth in services, wholesale, retail and construction.

“On the contrary, there was a decline in activity in the manufacturing and agricultural sectors. New orders placed with Kenyan companies also increased in August, although the increase was only modest. Some companies continued to highlight weak purchasing power of customers,” the report said.

According to Christopher Legilisho, economist at Standard Bank, “the August PMIs show the private sector is only marginally recovering. Output and new orders have recovered from the slump in previous months. “However, concerns about consumer spending remain as many firms see overall demand as weak in a more difficult economic and business environment. As a result, firms have cut staff after seven months of intensive hiring; the backlog of work has increased as a result,” he said.

With sales recovering slightly after a sharp decline in July, companies decided to cut jobs in the latest survey period, marking the first decline this year.
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