Kenya PMI Slump Shows Fuel Costs Are Hitting East Africa’s Private Sector

Kenya’s private sector contracted for a third consecutive month in May, underlining how fuel prices and weak demand are filtering through one of East Africa’s most important economies.

The Stanbic Bank Kenya Purchasing Managers’ Index, compiled by S&P Global, fell to 46.6 in May from 49.4 in April. A reading below 50 signals contraction, while a reading above 50 indicates expansion. The May result marked the steepest decline since July 2024, according to reporting on the May PMI release.

The survey pointed to weaker demand, inflationary pressure and a shortage of new work. Manufacturing was the only sub-sector reported to have expanded, while other parts of the private sector struggled with rising input, purchase and output prices. The data suggests that Kenya’s growth story is increasingly being tested by the cost of energy and transport.

Fuel prices have become a central economic issue in Kenya this year. In April, the Energy and Petroleum Regulatory Authority raised retail fuel prices after higher crude costs pushed up the cost of imported petroleum products, with petrol and diesel prices both increasing sharply, according to Reuters.

That shock has moved beyond filling stations. Transport costs are a major driver of prices across Kenya’s economy because the country depends heavily on road logistics for people, goods and regional trade. Kenya also serves as a key import and transit hub for several landlocked neighbours, making fuel costs a regional competitiveness issue rather than a domestic inconvenience.

The PMI data comes after Kenya’s statistics office said the economy grew by 4.6 percent in 2025 and forecast 4.9 percent growth in 2026. That outlook remains positive, but the May PMI shows that firms are facing a more difficult operating environment than headline growth projections may suggest.

Inflation also rose to 6.7 percent year-on-year in May from 5.6 percent in April, according to the PMI report. That placed inflation closer to the upper end of Kenya’s target band and increased pressure on households already absorbing higher transport and food costs.

For policymakers, the risk is that fuel-driven inflation weakens demand just as the government is trying to sustain growth and preserve fiscal space. The May PMI should therefore be read as more than a monthly business survey. It is an early warning signal that external energy shocks are beginning to affect private-sector confidence, consumer demand and the cost structure of firms.

For East Africa, the lesson is clear: energy security, transport efficiency and inflation management are now central to business resilience.