Kenya's private sector is demonstrating renewed signs of resilience, with business activity expanding for a second consecutive month in October 2026. The Stanbic Bank Kenya Purchasing Managers' Index (PMI) rose to 52.5 in October from 51.3 in September, moving further above the 50-point threshold that separates expansion from contraction. This growth is attributed to stronger customer demand and rising business confidence.
The manufacturing sector led the improvement, recording the strongest increases in output and new orders among the five monitored sectors. However, construction was the only sector to register declining sales, highlighting the uneven nature of the recovery. Business confidence also strengthened considerably, with the future output index reaching its highest level in six years.
A significant 51 per cent of surveyed firms anticipate higher activity over the coming year, compared with 31 per cent in September. This optimism is attributed to planned business expansions, new products, marketing initiatives, and investment. Stanbic economist Christopher Legilisho noted that translating these expectations into sustained capital expenditure and employment growth will depend on whether businesses can manage rising costs and cash-flow constraints.
The improvement in business activity coincided with renewed inflationary pressure, with Kenya's annual inflation rate rising to 7.3 per cent in October from 6.8 per cent in September. This increase was driven principally by transport, food and non-alcoholic beverages, and housing, water, electricity, gas, and other fuels. Core inflation, which excludes volatile items such as food and energy, stood at 4.3 per cent.
The PMI survey revealed that input cost inflation accelerated to its fastest pace since November 2023, with businesses frequently citing higher fuel and transport expenses. Selling price inflation also reached its second-fastest pace in three years as firms passed some of the additional costs on to customers to protect their margins.
Employment conditions reveal another important dimension, with businesses increasing staffing for the fifth consecutive month, but the pace of job creation was modest and the weakest in the current expansion sequence. Meanwhile, outstanding business accumulated at the fastest rate in seven years, suggesting that stronger demand is stretching existing operating capacity.
Kenya's broader economic outlook remains cautiously positive, with the Central Bank of Kenya (CBK) revising its 2026 economic growth projection upwards to 5 per cent from 4.9 per cent in October. The European Bank for Reconstruction and Development (EBRD) projects Kenya's economy to expand by 4.7 per cent in 2026.
Key points
- Kenya's private sector is showing renewed signs of resilience, with business activity expanding for a second consecutive month in October 2026.
- The improvement in business activity coincided with renewed inflationary pressure, with Kenya's annual inflation rate rising to 7.3 per cent in October.
- Employment conditions reveal a modest pace of job creation, with businesses increasing staffing for the fifth consecutive month.
