Kenyans Slash Household Spending as Fuel and Transport Costs Rise Sharply – Report
Kenya’s private sector recorded its sharpest contraction since July 2024 in May, as rising costs and weaker consumer spending weighed on business activity, according to the latest Stanbic Bank Purchasing Managers’ Index (PMI).
The headline PMI fell to 46.6 in May from 49.4 in April. A reading below 50 indicates a contraction in business activity, and the latest figure points to a worsening operating environment for firms facing increasing cost pressures. The report showed that businesses raised their selling prices at the fastest rate in two and a half years as purchase costs continued to climb.
Staff costs increased only slightly, indicating that higher commodity and supply expenses were the main drivers of inflationary pressure. Economist Christopher Legilisho said households are becoming more cautious with their spending as higher food, fuel and transport costs reduce disposable income.
“Budgets are under strain. Firms are feeling the pressure because of rising costs. Consumers are worried about higher fuel and transportation costs, so their budgets are also coming under pressure, and that is weighing on spending conditions,” he said.
Weaker consumer demand has affected business performance, with new sales declining for a third consecutive month and at the fastest pace since mid-2025.
The slowdown was most evident in the construction and services sectors, which reported the sharpest declines in new business.
The results reflected weaker investment activity and reduced discretionary spending. Agriculture, manufacturing, wholesale and retail sectors recorded modest growth, although this was not sufficient to offset the broader decline.
Businesses surveyed cited weaker sales, cash flow difficulties and rising costs as the main reasons for reducing their purchasing activity.
The findings highlight the growing impact of inflation on both households and businesses. Rising prices are reducing consumers’ purchasing power, while companies face the challenge of managing higher operating costs amid softer demand.
Although firms have increased prices to protect profit margins, higher costs for consumers could place further pressure on household budgets and demand. Inflation has accelerated for a third consecutive month and has reached its highest level in more than two years, adding to concerns about the outlook for the private sector.
