Business activity dips in May amid deepening economic crisis

Graph showing a business decline. [Courtesy]

Across Kenya, from small kiosks in sprawling estates to construction sites and transport depots, businesses are bleeding cash as soaring fuel and food costs force ordinary Kenyans to keep their wallets shut, with nothing left to spend.

The sharpest business slowdown in nearly two years has taken hold, a new survey shows, with sales dropping at the fastest pace since mid‑2025 and jobs being cut for the first time this year.

“Consumer resistance to spend, alongside rising costs, contributed to contractions in new orders and output,” said Christopher Legilisho, an economist at Standard Bank, which yesterday, alongside S&P Global, published the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for May, which polled over 400 companies.

The survey, which collected data from May 12 to May 27, showed that the PMI dropped to 46.6 in May, down from 49.4 in April. Readings above 50.0 indicate growth.

A visit by The Standard to one shopping mall in Naivasha and several retail outlets found far more idle shop attendants than browsing customers. 

At a supermarket, only a handful of shoppers moved through aisles stacked with goods. Several stall owners at a downtown market said they had gone hours without making a single sale. “People come, look at the price, and walk away,” said Mukami Wanjiku, who sells second-hand clothes.

“They say ‘no money’ and leave.”

The survey data backs up her experience. “Constrained budgets” and “customer hesitancy” were repeatedly cited by panellists as the main forces killing demand. 

New sales decreased at the fastest pace since July 2025 because “clients tightened budgets midway through the second quarter.”

The trouble started with prices. Fuel and transport costs surged in May, pushing up the price of raw materials and everyday supplies at the steepest rate since November 2023. The war in the Middle East was cited as an extra factor driving up costs for food, fuel and transport.

“Inflationary pressures have intensified, constraining demand conditions, with input prices, purchase costs and output prices driven up by higher fuel and transportation costs,” Legilisho said.

Businesses responded by raising their own selling prices at the fastest pace in two and a half years, a brutal cycle in which shoppers face higher prices just as their ability to pay evaporates. No sector has been spared except manufacturing, which alone managed to grow production. Everywhere else, construction, services, wholesale and retail, the story is the same: falling orders, shrinking activity, and mounting anxiety.

“The solid downturn was partly driven by a notable acceleration in the pace of decline in business activity,” the report said.

“Panellists often attributed the contraction to lower new work intakes and weak demand.”

For small traders across the country, that means days without a single sale. For a construction worker, it means being sent home as projects stall. For a lorry driver, it means fewer trips as goods stop moving.

The collapse in demand has forced firms to cut staff for the first time since the start of 2025, ending a 15‑month run of job creation. The axe fell mainly on temporary workers, with contracts cut short.

“Reduced pressure on capacity via a fall in new orders led firms to cut their workforce numbers for the first time in 16 months,” the survey noted.