Kenya’s private sector activity contracts sharply in July 2025 as protests, inflation, and taxes hit business, PMI drops to 46.8.
Kenya’s Private Sector Contracts Sharply in July
Kenya’s private sector activity shrank at the fastest pace in a year in July 2025, as political protests, rising taxes, and soaring fuel prices disrupted operations and weakened demand.
The country’s Purchasing Managers’ Index (PMI) dropped to 46.8, down from 48.6 in June, marking the third straight monthly decline and the lowest reading since July 2024, according to a Stanbic Bank Kenya survey published on Tuesday.
A PMI below 50.0 signals a deterioration in business conditions, while a reading above shows improvement.
Business Health Declines as Protests Escalate
“The PMI dropped for the third consecutive month and remained below the 50.0 neutral threshold,” the report noted.
“At 46.8, down from 48.6 in June, the index signalled a solid downturn in the health of the private sector economy.”
Anti-government protests over taxes and governance have disrupted supply chains and retail across major towns in Kenya. July saw clashes between protestors and police, leading to property damage, looting, and business shutdowns.
Rising Inflation, Falling Orders
Inflation rose to 4.1% in July, up from 3.8% in June, according to the Kenya National Bureau of Statistics. The uptick was driven by broad-based increases in food, transport, and utility prices.
New business orders fell at the sharpest rate in 12 months as households cut back on spending.
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“The data reflects the negative impact that recent protests have had on businesses,” said Christopher Legilisho, economist at Standard Bank. “Services and manufacturing were hit hardest by weak consumer demand.”
Fuel, Taxes Push Costs to 7-Month High
Firms experienced a steep rise in costs due to higher fuel prices and new tax measures implemented in July.
The Energy and Petroleum Regulatory Authority (EPRA) increased fuel pump prices, driving up transport and production costs.
“Pricing pressures increased due to a rise in fuel prices,” Legilisho confirmed.
Businesses raised selling prices at the fastest pace since January 2025 to pass rising input costs onto consumers.
Purchasing and Inventory Activity Fall
Businesses significantly reduced their purchasing activity due to weaker demand and escalating costs—the sharpest drop in almost three years.
Manufacturers led the decline, and stocks of purchases fell for the first time in 2025. Despite this, employment levels remained stable, helping firms clear backlogs.
The drop in pending work was the strongest since April 2021.
Hope on the Horizon: Confidence Improves
Amid the downturn, business confidence rose for the second month, reaching a 15-month high in July.
Firms linked the optimism to new product launches, land acquisitions, and branch expansion.
“Employment conditions were stable, notwithstanding the dip in output,” Legilisho said. “Business confidence increased for a second month in a row, indicating firms expect recovery within a year.”
Outlook: Fragile but Resilient
Despite improvements in sentiment, the PMI data signals a fragile economic outlook, with political uncertainty, inflation, and high operating costs expected to weigh on growth in the coming months.