Job seekers fill in forms at Kenyatta International Convention Centre in Nairobi during a mass recruitment drive for job opportunities in Qatar on October 25, 2024.
Chief Executives Officers in the private sector are bracing for job cuts and softer output in early 2026 as demand for goods eases after the festive season, reversing the hiring momentum observed towards the close of this year, a new survey shows.
The Central Bank of Kenya (CBK) CEOs Survey indicates that demand orders, production volumes, and employee numbers are expected to decline in the first quarter of 2026 compared to the final quarter of this year.
The anticipated slowdown follows a festive-driven pickup in activity in the final quarter of 2025, echoing recent Purchasing Managers Index (PMI) data that showed stronger output and hiring as year-end spending boosted private sector workloads.
Unlike the PMI, which tracks month-on-month activity, the CEOs' survey captures expectations, revealing growing caution among firms about sustaining demand once seasonal consumption fades.
Executives surveyed said the moderation reflects normal post-festive patterns, with households typically tightening spending at the start of the year after elevated December outlays.
“Demand orders, production volume, and the number of employees are expected to decline, reflecting the anticipated moderation in business activity in quarter one as the effects of the festive season fade,” wrote CBK.
“On the other hand, sales and purchase prices are expected to remain largely stable with an upward bias in the next quarter, in tandem with expected developments in international and domestic commodity prices.”
The CBK survey targeted CEOs of over 1,000 private firms, drawn from diverse sectors including financial services, manufacturing, hospitality, real estate, ICT, agriculture as well as professional services.
Reducing production requirements
This seasonal pullback is expected to feed directly into lower order books, reducing production requirements and limiting the need for additional labour across sectors.
For many firms, labour costs remain one of the most adjustable expenses in the short term, explaining why employment expectations turn negative when demand weakens.
Manufacturing firms are particularly exposed to post-festive moderation, given their sensitivity to swings in consumer demand and inventory cycles.
Service-sector firms also anticipate softer conditions as households rein in discretionary spending after the holiday period.
Despite the expected slowdown, the CBK survey suggests that firms are not anticipating a collapse in activity, but rather a normalisation after a strong quarter.
The shift marks a sharp contrast with November PMI data, which showed firms resuming hiring after months of caution, supported by the strongest activity levels since 2020.
PMI respondents had cited improving demand, rising sales, and easing cost pressures as reasons for expanding payrolls, dynamics CEOs now see as difficult to maintain into the coming quarter.
The survey shows that firms expect prices of goods and services to remain largely stable in the first quarter of next year, limiting the ability to protect margins through price increases.
This mirrors earlier PMI findings where firms cited weak pricing power during periods of subdued demand, forcing tighter control over expenses.
Despite the cautious outlook, most firms have reported operating below or near full capacity, allowing them to absorb demand fluctuations without immediate need for capital investment.
This spare capacity reduces the urgency to hire even if demand stabilises, reinforcing the expectation of subdued employment growth.
