Kenya’s Manufacturing and Mining sectors experienced substantial declines in Q3 2024, as highlighted in the latest Producer Price Index (PPI) report from the Kenya National Bureau of Statistics (KNBS). The report signals mounting challenges in these critical sectors, with overall producer prices for both industries showing a marked contraction in the third quarter.
The Mining of Metal Ores category led the downward trend, with a significant 7.84% decline in producer prices from June to September 2024. On a year-over-year basis, the sector recorded an even steeper decline of 13.49%. This sharp drop can be attributed to fluctuating global commodity prices, weakened export demand, and operational challenges within the local mining industry.
Similarly, the Manufacture of Basic Metals saw a 7.87% quarterly decline, signaling a drop in the production and pricing of essential industrial inputs like steel and iron. The sector’s performance reflects broader global trends of price volatility, particularly for raw materials that Kenya imports or exports, impacting both local production costs and international competitiveness.
Table 1: Quarterly and Year-on-Year Changes in Key Sectors (Q3 2024)
| Sector | % Change over Q2 2024 | % Change over Q3 2023 |
|---|---|---|
| Mining of Metal Ores | -7.84% | -13.49% |
| Manufacture of Basic Metals | -7.87% | -0.07% |
| Manufacture of Pharmaceuticals | -2.67% | -16.54% |
| Manufacture of Food Products | -1.97% | -13.39% |
Another sector that faced steep declines was the Manufacture of Pharmaceuticals, which recorded a year-on-year contraction of 16.54%. This decline comes amid growing challenges in the healthcare supply chain, exacerbated by the rising costs of inputs and regulatory hurdles. The reduction in pharmaceutical prices may also reflect broader economic pressures affecting consumer purchasing power and healthcare spending.
Despite these challenges, some sectors exhibited resilience. The Water Supply, Sewerage, and Waste Management sector recorded an 8.55% year-on-year increase, highlighting the rising costs and demand for these essential services. The surge in pricing may be driven by infrastructure upgrades and increased operational costs, as well as growing urban demand for reliable water and waste management services.
Manufacture of Motor Vehicles also showed encouraging signs of recovery, with the sector posting a 6.36% quarterly growth. This marks a positive rebound from earlier contractions in the automotive industry, driven by renewed demand for vehicles and improved supply chain stability. The increase in vehicle manufacturing signals that consumer confidence may be slowly returning, particularly in higher-value sectors.
On a broader level, the report showed that the overall PPI for Kenya decreased by 1.96% in Q3 2024. This contraction reflects the continuing volatility in global supply chains, rising inflationary pressures, and the impact of geopolitical factors affecting trade. The overall decline in producer prices highlights the ongoing challenges Kenyan industries face in stabilizing costs and maintaining output in a tough economic climate.
Table 2: Key Producer Price Changes for Q3 2024
| Sector | % Change over Q2 2024 | % Change over Q3 2023 |
|---|---|---|
| Overall Producer Price Index | -1.96% | -3.64% |
| Low-Value Overdrafts | -32.57% | -5.14% |
| High-Value Overdrafts | -17.55% | -25.3% |
Additionally, the report noted that sectors like food manufacturing experienced year-over-year price declines of 13.39%, which could indicate broader challenges in agriculture and food production. The impact of fluctuating agricultural output, combined with changes in food export markets, has placed downward pressure on producer prices in this sector.
The Banking and Finance sectors, which play a crucial role in providing credit and financial support to industrial sectors, may face additional challenges as a result of these price contractions. Reduced profits in manufacturing and mining could lead to lower demand for loans, investment, and credit, potentially affecting the broader economy.
While there are some areas of optimism, the PPI report underscores the difficulties faced by key industries in Kenya. For the country to maintain sustainable growth, it will be critical for both the public and private sectors to collaborate on solutions that stabilize prices, improve access to raw materials, and bolster the competitiveness of Kenya’s industrial base.
