Cheaper manufacturing signals hope for lower retail prices
Producer inflation, which captures the changes in costs before goods reach the consumer, can influence retail prices.
Kenya’s industrial producers are experiencing a notable decline in costs, a trend that could ease pressure on consumer prices in the near future.
Latest figures from the Kenya National Bureau of Statistics (KNBS) indicate that the Producer Price Index (PPI), which measures the average selling prices received by local manufacturers, dropped to 134.78 by the end of September 2025.
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This marks the lowest level recorded since March 2023, signalling a slowdown in production expenses across various sectors.
Producer inflation, which captures the changes in costs before goods reach the consumer, can influence retail prices.
When production costs decrease, manufacturers have more room to avoid passing high costs to buyers, potentially reducing the overall inflation burden on households.
“The year-on-year producer inflation rate recorded in September 2025 was -0.79 per cent, with the Producer Price Index reaching 134.78 during the same period,” the KNBS said in its latest report on price trends.
Data from the agency highlights that the drop in costs was observed across multiple industrial segments.
The manufacturing sector recorded a slight decline of 0.52 per cent in producer costs, while mining and quarrying saw a sharper fall of 4.48 per cent.
Other sectors also reported decreases, including electricity, gas, steam, and air conditioning supply, which fell by 2.03 per cent, while water supply and waste management dropped by 2.69 per cent.
Overall, factory prices were down 2.45 per cent compared to June 2025 levels.
The easing in production costs comes alongside a series of reductions in the Central Bank of Kenya’s benchmark lending rate, which has been lowered by a cumulative 3.75 percentage points since August last year to encourage lending and economic growth.
Analysts believe that continued declines in producer prices could provide much-needed relief for consumers, particularly as household budgets have been stretched by rising costs in previous months.
If the trend continues, retailers may pass on some of the savings to customers, easing the pressure of inflation on everyday goods.
The PPI movement is being closely monitored as an early indicator of inflation trends, with the current readings suggesting that the upward pressure on consumer prices may be slowing.
Economists also note that this environment supports a more favourable outlook for private-sector investment, as lower production costs and borrowing rates improve profit margins and encourage business expansion.
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