The cost of living measure dropped to an 18-month low in September due
to lower prices of food but a slowdown in agriculture saw the economy
grow slower in the three months to June. FILE PHOTO | NMG
Summary
- This decline in agriculture also reflected the slowdown in private sector activity.
- Inflation fell to 3.83 percent in September, from 5.0 percent a month earlier, according to the latest figures released by the Kenya National Bureau of Statistics (KNBS) Monday.
- The drop in the cost of living measure, the lowest since April last year, was linked to the fall in vegetable prices on improved weather in recent months.
The cost of living measure dropped to an 18-month low in
September due to lower prices of food but a slowdown in agriculture saw
the economy grow slower in the three months to June.
This decline in agriculture also reflected the slowdown in private sector activity.
Inflation
fell to 3.83 percent in September, from 5.0 percent a month earlier,
according to the latest figures released by the Kenya National Bureau of
Statistics (KNBS) Monday. The drop in the cost of living measure, the
lowest since April last year, was linked to the fall in vegetable prices
on improved weather in recent months.
Delayed rainfall
in the second quarter to June affected the key farming sector, which
accounts for close to a third of economic output, and this, in turn,
slowed down economic growth. In recent months, the slow growth of the
economy has seen companies freeze hiring and pay increases while some
have had to shed jobs.
Kenya’s economy grew by 5.6
percent in the second quarter of this year, down from an expanding 6.4
percent in the same period a year earlier, the bureau said, adding that
manufacturing and transport sectors decelerated.
“Agriculture’s performance as well as that of electricity and
water supply were mostly hampered by a delay in the onset of the long
rains,” the KNBS said. “Transportation industry was negatively impacted
on by rise in prices of fuel.”
Farming, which includes forestry and fishing, grew by 4.1 percent during the period, down from 6.5 percent a year earlier.
Central
Bank Governor Patrick Njoroge last week maintained a full-year growth
forecast of six percent, citing robust bookings in the tourism sector.
The bank will review its forecast after yesterday’s release of the
second quarter data, he said.
Manufacturing, which
accounts for about 10 percent of GDP, saw a growth to 4.2 per cent from
4.7 per cent last year. This is in line with Kenya’s private sector
performance report from Stanbic Bank, which reported reduced activities
with cashflow problems hurting performance.
The Markit
Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for manufacturing
and services fell to 52.9 from 54.1 in July. Any reading above 50
indicates growth. In May, the index stood at 51.3.
The
survey showed that activity was affected by cashflow problems, partly
arising from a backlog of bills from government departments. Companies
have responded by freezing expansion plans and halting hirings while
some have cut jobs to protect profits.
But easing inflation could ease workers’ pain.
“Between
August and September 2019, food and non-alcoholic drinks’ index
decreased by 0.40 per cent due to decrease in prices of some foodstuffs
outweighing increases recorded in others,” said KNBS.
In
September, prices of commodities such as tomatoes, cabbages, carrots,
onions, Irish potatoes and sugar all eased. This cut food inflation from
7.9 per cent in August to 7.13 per cent.
The inflation figure is within government’s target range of between 2.5 per cent and 7.5 per cent.
Policymakers
held the benchmark lending rate at 9.0 percent last week, the seventh
hold decision in a row, saying inflation expectations were
well-anchored. CBK said recently it expects inflation to remain within
this range mainly on expectations of lower food prices hinged on
favourable weather conditions, and lower electricity prices on reduced
usage of expensive power sources.
palushula@ke.nationmedia.com
dguguyu@ke.nationmedia.com
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