June Slump: Kenya’s Private Sector Activity Falls to Lowest Level in a Year

June Slump:

Kenya’s private sector hit the brakes in June 2025 recording its slowest performance in a year according to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI). The data paints a worrying picture for East Africa’s major economy through decreasing new orders weak customer demand and increasing costs piling pressure on businesses.

This slowdown the lowermost private sector growth rate since June 2024 has sparked concerns between investors analysts and policymakers over Kenya’s mid-year economic resilience.

What the PMI Reveals: Key Metrics for June 2025

The Stanbic PMI a closely watched barometer of business activity fell to 47.2 in June from 50.1 in May 2025 sliding below the neutral 50.0 threshold that separates growth from contraction.

PMI Highlights:

• New Commands: Dropped for a second straight month due to weak consumer spending.
• Business Confidence: Weakened to its lowermost level in nine months over firms cautious about Q3.
• Input Prices: Rose sharply due to petroleum prices and import-related inflation.

“This decline signals growing headwinds in Kenya’s economic landscape commonly for SMEs and retail-dependent sectors” said a Nairobi-based economist at Stanbic Bank.

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Why Is Kenya’s Private Sector Slowing Down?

1. Weak Consumer Demand

Through the cost of living in Kenya 2025 continuing to increase, households have pulled back on discretionary spending. From Nairobi to Mombasa retailers and service providers report slower foot traffic and reduced order volumes.

2. Inflationary Pressures

The persistent inflation specially on fuel, food and transport has eaten into shopper and business margins. The Central Bank’s recent tightening of monetary policy has curbed credit access mostly for small and medium enterprises (SMEs).

3. High Interest Rates & Policy Uncertainty

Despite some stabilization interest charges in Kenya remain raised up discouraging private borrowing and resources. Ongoing tax reforms and fiscal tightening have added to business doubt.

4. Regional Slowdown

The broader East African economic landscape is also showing signs of strain. Comparative PMIs in Uganda and Tanzania have shown marginal growth proposing Kenya’s position is relatively weaker within the region.

Implications: What the June 2025 Slowdown Means for Kenya

Employment Outlook

As business activity weakens, job creation is likely to stall. Some sectors specially manufacturing, logistics and retail may start trimming headcounts if sluggish demand persists.

Investment Confidence

The private sector’s performance serves as a litmus test for investors. Continued slowdown could dampen foreign direct investment (FDI) inflows and local capital formation.

Policy Response Expectations

Through GDP growth targets under pressure Kenyan policymakers may be forced to reassess fiscal plans. The Central Bank could face mounting calls to lower interest rates if inflation shows symbols of easing.

Regional Relationship: How Kenya Stacks Up in East Africa

Kenya’s relatively sharper decline reflects localized challenges such as fuel levies new tax compliance necessities and supply chain volatility.

Outlook: Can Kenya’s Private Sector Bounce Back in H2 2025?

Despite the June dip analysts say the outlook could recover if:

• Inflationary pressures ease in Q3.
• Consumer spending picks up during back-to-school and holiday months.
• Government fast-tracks infrastructure spending to stimulate local procurement.

Final Thoughts :

Kenya’s June private sector slowdown sends a strong signal that economic caution is setting in though it also presents an opportunity for policymakers and businesses to course correct ahead of Q3.