Fifteen months of unbroken job creation in Kenya's private sector have come to an abrupt end, and the May data make clear this is not a seasonal blip.
Private sector businesses in Kenya signalled a renewed decline in staff numbers during May, ending 15 months of continuous job creation. Panelists reported that the fall often reflected reductions in temporary contract staff.
The Stanbic Bank Kenya Purchasing Managers' Index headline reading fell sharply to 46.6 in May from 49.4 in April, the steepest deterioration in private sector health since July 2024, and well below the 50-point threshold separating expansion from contraction. The reading signals that business conditions are not merely softening, they are contracting at an accelerating pace.
The demand collapse is the primary driver. New orders placed with Kenyan firms fell for the third consecutive month, and at the sharpest pace since July 2025, as firms confronted softer customer demand amid tighter household budgets. Output levels also declined for a third straight month, highlighting the extent to which weaker demand is filtering through to actual production and service delivery across large sections of the economy.
The sectoral picture is uneven but broadly concerning. The decline in headcount was most evident in agriculture and the wholesale and retail sectors, which recorded the sharpest reductions. Construction and services firms recorded declines in both output and new orders, while manufacturers were the only businesses to report growth in production during May.
The external shock, compounding the structural weakness, has a specific origin. Consumer resistance to spending, alongside rising costs, contributed to contractions in new orders and output, with declines partly stemming from a week-long disruption to business activity caused by nationwide protests by transportation sector players that constrained economic activity.
The input cost squeeze is equally relentless. Firms scaled back input purchases for the first time in eight months, as weaker sales, cash-flow constraints, and higher operating costs discouraged spending on materials and supplies a retrenchment in procurement that typically precedes further output cuts in subsequent months.
The May PMI reading lands at a particularly sensitive moment for Kenya's economy. The country is navigating the aftermath of its Gen Z protests, an unresolved fiscal consolidation programme, elevated borrowing costs, and a global energy shock from the Middle East that has kept fuel and logistics costs elevated. Many firms reported that higher costs continued to erode purchasing power among consumers, reducing spending on goods and services and contributing to a more cautious business environment.
After 15 months of momentum, Kenya's private sector has blinked. Whether May proves to be a temporary setback or the beginning of a more sustained deterioration will depend heavily on whether household incomes can recover and on how quickly the transport sector disruptions that compounded the downturn are resolved.
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