Private Sector Shrinks as High Fuel Costs Weigh on Businesses

Kenya’s private sector remained under pressure in April, shrinking for the second consecutive month as rising fuel prices pushed up operating costs and weakened demand across key industries.

Businesses reported increased transport and shipping expenses following a sharp rise in fuel prices. Super petrol rose by Sh19.32 to Sh197.60 per litre, while diesel increased by Sh30.09 to Sh196.63. These higher costs have made it more expensive for firms to operate, contributing to slower business activity.

Data from Stanbic Bank Kenya’s Purchasing Managers’ Index shows the sector remained in contraction territory, with a reading of 49.4, below the 50-point mark that signals growth, although slightly improved from 47.7 in March.

Firms across wholesale and retail trade, agriculture, and services sectors reported softer new orders, reflecting weaker consumer demand. Businesses also faced supply challenges linked to disruptions from the Middle East and Asia, further affecting operations.

Companies remained cautious in their outlook, with concerns over the Middle East conflict and its impact on supply chains and domestic activity. This uncertainty led to a drop in business confidence compared to March.

Despite the slowdown, employment levels stayed broadly stable, supported mainly by temporary hiring. Some businesses also continued to pursue expansion and product diversification, even as overall conditions remained difficult.

At the same time, inventories and purchasing activity showed some recovery, as firms stocked up in anticipation of possible further increases in fuel prices.