The Markit Stanbic Bank Kenya Purchasing Managers' Index (PMI) fell to 47.6 in January from 53.7 a month earlier. The 50.0 mark separates growth from a contraction in activity.
"Lower client spending drove a marked decline in sales, in part related to strong price pressures and a recent surge in COVID-19 cases from the Omicron variant," Stanbic Bank Kenya said in comments accompanying the survey.
"Kenyan companies faced a faster rise in total input prices at the start of the year, driven by sustained increases in the price of raw materials and fuel."
Like other countries, Kenya's economy was hurt by the COVID-19 crisis as restrictions imposed to fight the pandemic reduced revenues and stifled growth.
The statistics office said in late December the economy recovered in the third quarter following the easing of measures aimed at curbing COVID-19's spread.
"While export demand grew marginally, domestic demand fell significantly as client spending was negatively affected by rising inflation and a resurgence in COVID 19 due to the Omicron variant," Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank, said.
(Reporting by George Obulutsa; Editing by Toby Chopra)
