The economic shockwaves from the Middle East war are beginning to show up in Kenya’s private sector, with the latest business survey pointing to a demand slowdown colliding with stubborn, locally rooted inflation pressures.
- •The Stanbic Bank Kenya Purchasing Managers’ Index (PMI) fell to 47.7 in March from 50.4 in February, signalling a contraction in business activity for the first time in seven months.
- •Firms linked the downturn partly to the ripple effects of the Middle East conflict, which has disrupted supply chains, raised shipping costs and triggered caution among consumers.
- •Globally, the war has pushed oil prices higher and disrupted key trade routes, fuelling inflation and slowing growth across multiple economies.
For Kenya, a net fuel importer, the transmission has been immediate, through higher transport costs, rising input prices and increased uncertainty in business planning.
“A weaker Stanbic Kenya PMI in March reflects demandside concerns , softer spending power constraining demand, and supply-side concerns about the war in the Middle East. Output and new orders declined in most sectors, implying that businesses expect to be constrained by the disruptions from geopolitical tensions,” Christopher Legilisho, Economist at Standard Bank
“Despite lower output and new orders, employment conditions held up as firms in the agrarian sector drove hiring. Backlogs declined, while there was reduced optimism about output over the next 12 months. Slowing demand meant subdued increases in quantities purchased and inventories, though delivery times improved.”
“Higher input prices and purchase prices were linked to concerns about taxes and the impact of the war in the Middle East on shipping costs. Output prices increases were subdued as firms declined to pass on costs to consumers in an already weak demand environment.”
Official data from the Kenya National Bureau of Statistics (KNBS) shows headline inflation holding at 4.4% in March, suggesting stability. Food prices, shaped by weather variability and supply chain inefficiencies, continue to exert steady pressure. Electricity costs are also feeding through the economy, raising production and distribution expenses in ways that are less visible but more enduring.
According to the PMI survey, input costs rose at the fastest pace in over two years, driven by fuel, taxes and logistics, yet firms were unable to pass on the full cost to customers due to weak demand. The result is tightening margins across the private sector.
