The Stanbic Bank Kenya Purchasing Managers' Index (PMI) fell to 47.8 in June from 49.4 a month earlier. Readings above 50 signal growth. It is the fifth month in a row that the PMI has stayed below 50, signalling a contraction in activity.

"Companies reported tough trading conditions influenced by high inflation in the country and a lack of client spending power," Stanbic Bank Kenya said.

"Sector data revealed the services and wholesale & retail sectors as key sources of weakness."

Inflation in Kenya eased to 7.9% year-on-year in June from 8.0% a month earlier, data from the statistics office showed.

Kenya's shilling, which has hit repeated record lows since late 2021, is down 12% against the dollar so far this year.

On the positive side, the weaker shilling provided a reprieve for exporters, the survey showed.

"New export business has remained in expansionary territory for the fourth consecutive month thanks to a weaker shilling," Mulalo Madula, an economist at Stanbic Bank, said.

(Reporting by George Obulutsa; Editing by Susan Fenton)