Kenya's Stanbic Bank Kenya Purchasing Managers' Index (PMI) rose to 52.5 in October, up from 51.3 in September, marking the highest reading of 2026.
The index, compiled by Stanbic Bank and S&P Global from about 400 private-sector firms surveyed between 12 and October 28, stayed above the 50-point expansion threshold for a second month.
New orders grew at the fastest pace in almost a year and output expanded for the first time since February, with 31 per cent of firms reporting higher output and 23 per cent reporting lower.
Manufacturing recorded the strongest increase in both output and new orders, while construction was the only sector to post lower sales than in September.
The PMI indicates an uneven recovery, with firms selling more but struggling to translate stronger demand into higher output and employment, leaving consumers to bear part of the cost rise.
About 36 per cent of firms said their total input costs rose in October, compared with 2 per cent that saw a decline, pushing input-cost inflation to its fastest rate since November 2023.
Fuel and transport expenses were the main drivers of higher input costs, and 37 per cent of respondents reported higher purchase prices as suppliers raised fees amid shortages and broader inflation.
Firms raised their own selling prices at the second-fastest rate in three years, behind only June 2026, in an effort to protect margins.
Stanbic Bank economist Christopher Legilisho said companies were increasingly passing higher expenses to customers to shield margins and that selling-price inflation was the second-fastest in three years.
Analysts at Stanbic Bank and S&P Global noted that cash-flow difficulties and inflation concerns limited firms’ ability to expand production, clear backlogs and hire more workers.
Outstanding work grew for the fifth consecutive month, reaching the fastest pace in exactly seven years, as firms blamed stronger demand, funding gaps and processing delays.
Employment rose for a fifth month but at the slowest rate of the current expansion, reflecting employers’ caution amid higher costs and cash-flow constraints.
The Future Output Index rose as 51 per cent of firms now expect higher activity over the next 12 months, up from 31 per cent in September, the highest level since March 2020.
Firms linked their optimism to planned expansions, new products, marketing campaigns, investments and operational improvements.
Kenya’s annual inflation accelerated to 7.32 per cent in October from 6.76 per cent in September, driven by higher food and transport costs.
The Energy and Petroleum Regulatory Authority raised the maximum pump prices for petrol and diesel for the October 15 to November 14 pricing cycle, adding to transport cost pressures.
Legilisho warned that the combination of rising prices, mounting backlogs and weaker hiring could weaken the recovery if firms cannot secure sufficient working capital.
Suppliers delivered faster than any month since September 2021, while firms built inventories at the fastest rate in exactly four years, with manufacturing, agriculture and services holding more stock.
The PMI results were published on November 4.
