Kenyan businesses are raising the prices of goods and services at one of the fastest rates in nearly three years, as rising fuel, transport and agricultural costs pile pressure on firms despite a recovery in customer demand.
According to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI) report, businesses increased their selling prices in September at the second-fastest rate recorded since November 2023, with only June 2026 registering a faster increase.
The development points to renewed pressure on household budgets, with businesses passing a growing share of their higher operating costs on to consumers.
According to the report obtained by Vantage Ke, about one in five monitored companies increased their selling prices in September, while only 2% reported a decline.
“Kenyan businesses raised their selling prices at the second-fastest pace in nearly three years,” the report states, noting that the acceleration was largely driven by rising input costs.
The survey found that roughly 30% of firms reported an increase in their total input costs during the month, compared with just 1% that recorded a decline.
Companies cited higher purchase prices, fuel costs and transport expenses among the main factors behind the increase. Shortages of agricultural products also contributed to rising costs, with firms specifically reporting higher prices for foodstuffs such as milk.
The higher costs came even as demand showed signs of improvement across the private sector. Kenya’s headline PMI climbed to 51.3 in September from 49.7 in August, moving back above the 50-point threshold that separates an improvement in business conditions from a deterioration.
New orders increased for the fourth consecutive month, with businesses attributing the stronger demand to improved market conditions, customer referrals, marketing campaigns and increased cash circulation.
However, the recovery in demand has yet to translate into a sustained expansion in actual business activity. The report found that business activity contracted for the seventh consecutive month, although the decline was only slight and represented the softest contraction in the current seven-month sequence.
Higher inflation and shortages of materials continued to constrain companies’ ability to meet demand.
Christopher Legilisho, an economist at Stanbic Bank, said the latest figures pointed to an improvement driven largely by demand rather than a broad-based economic recovery.
“The rise in Stanbic Kenya’s headline PMI in September points to a demand-led improvement in private sector conditions rather than a broad-based recovery in activity,” Legilisho said.
He noted that new orders had increased for a fourth consecutive month, supported by stronger customer demand and improved cash flows, but businesses were still struggling to turn those sales into increased production.
“Output contracted for a seventh straight month as higher fuel, transport and agricultural input costs, alongside material shortages, limited firms’ ability to convert sales into production,” he added.
The pressure was particularly evident in agriculture and wholesale and retail trade, where activity declined. Manufacturing, construction and services, however, recorded expansions during September.
Businesses also continued hiring, with employment increasing for the fourth consecutive month. Firms linked recruitment largely to rising workloads and stronger new business.
At the same time, backlogs of work increased for the fourth month running, suggesting that some companies are receiving more orders than they can process amid existing capacity and supply constraints.
The survey also showed that companies were rebuilding inventories after four consecutive months of declining purchasing activity. Stocks of purchases rose to their highest level since June 2025, partly reflecting expectations of stronger demand and concerns about future supply shortages.
Despite the mounting cost pressures, businesses remained relatively optimistic about the longer term. About 31% of survey respondents expected activity to increase over the following 12 months.
However, overall expectations slipped to a four-month low. Legilisho warned that the outlook would depend on whether cost pressures ease.
“The near-term outlook is therefore cautiously positive with demand momentum supportive of activity, but a sustained expansion will require an easing of cost pressures and improved input availability,” he said, adding “Otherwise, growth may remain modest and increasingly inflationary.”
The September PMI was based on responses from around 400 private-sector companies across sectors including agriculture, manufacturing, construction, wholesale and retail, and services.
