Consumers may find relief from lower retail prices of some commodities following a sharp dip in producer inflation in the first quarter of this year.
Producer inflation is measured by a Producer Price Index (PPI) and indicates changes in the selling prices received by domestic manufacturers or producers for their output.
Data by the Kenya National Bureau of Statistics (KNBS) showed that in March 2025, the year-on-year producer inflation stood at -5.67 percent, a decline from 7.48 percent recorded in March 2024.
KNBS data shows that during the quarter under review, mining and quarrying posted the sharpest drop in PPI at 3.6 percent, followed by power costs which slumped by 1.6 percent.
“Quarter-on-quarter changes in producer prices show a decline in the first quarter of 2025 by 3.6 percent in the mining and quarrying sector, 1.6 percent in electricity, gas, steam, and air conditioning supply, and 0.6 percent in manufacturing,” KNBS said in its latest review of the price movements.
“The overall producer prices in March 2025 decreased by 0.66 percent compared to December 2024 prices” it added.
During the quarter, the manufacture of beverages had the highest price decline at 9.62 percent, while the cost of mining metal ores recorded the highest year-on-year drop at 23.73 percent.
Conversely, the manufacture of leather and related products recorded the highest price increase during the three months ended in March at a 22.39 percent jump, while the manufacture of motor vehicles posted the highest rise at 21.62 percent year-on-year.
The Consumer Price Index, which measures the actual change of retail prices, rose for the fifth consecutive month in March 2025, with the index climbing from 143.12 in February to 143.69 in March and resulting in monthly inflation of 0.4 percent according to KNBS data.
A lowered PPI, coupled with reduced lending rates in the market, could likely reverse this trend.
Earlier this month, the Central Bank of Kenya (CBK) cut the benchmark rate to its lowest level in almost two years, reducing it from 10.75 to 10 percent and signalling lower domestic rates in the push for private sector credit growth.
But while businesses pass on increases in the cost of raw materials in the form of high retail prices, a fall in PPI does not guarantee reprieve to consumers.
This is mainly because businesses can opt to widen profit margins when the cost of raw materials drops, denying consumers anticipated gains.
