Kenya’s private sector is showing fresh signs of recovery, with companies increasing hiring in July at the fastest pace recorded so far in 2026. The rise in employment came as businesses attracted more customers and received stronger orders, although supply chain disruptions, higher transport costs and expensive inputs continued to limit production. The latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI) rose to 51.3 in July from 50.0 in June, signalling an improvement in private-sector business conditions after four months of stagnation or contraction.
The stronger hiring trend was largely driven by businesses bringing in short-term workers to manage growing workloads. Companies reported that new orders improved for the second consecutive month, supported by customer referrals, targeted marketing campaigns and the introduction of new products and services. Stanbic Bank economist Christopher Legilisho said the improvement was mainly driven by stronger new orders and modest short-term hiring, although delayed imports and elevated input costs continued to prevent businesses from fully turning new demand into increased production.
Despite stronger sales, output declined for the fifth consecutive month as firms struggled with inflationary pressures, tight liquidity and operational challenges. The continued production slowdown also resulted in unfinished work increasing for a second consecutive month. Businesses therefore appeared more willing to bring in temporary employees to handle immediate demand rather than make major long-term investments in capacity and permanent staffing.
Supply chain problems remained another major obstacle for Kenyan businesses. Supplier delivery times became slower for the second consecutive month as shortages of key materials, higher transportation costs and delays in imported components disrupted operations. Some companies increased their inventories to protect against future shortages and meet customer demand, while others reduced stock levels to preserve cash. At the same time, business confidence climbed to its highest level in nearly three and a half years, reflecting expectations of stronger demand, greater business diversification, digital investment and improved supply-chain management.
Cost pressures, however, remain a concern for the private sector. More than one-third of surveyed companies reported rising operating expenses, particularly from higher transport and fuel costs and material shortages linked to conflict in the Middle East. Yet businesses appeared cautious about passing these costs on to consumers, with only about 15% increasing selling prices amid fears that higher prices could weaken demand. The July PMI figures suggest Kenya’s private sector is gaining momentum, but businesses may need supply disruptions and cost pressures to ease before stronger customer demand can translate into sustained production and long-term job growth.
source: kenyanwallstreet
