Market News

Slow rise in price of goods signals slow growth for 2017

fuel

Inflation is likely to rise in the short term due to higher fuel costs. FILE PHOTO | NMG

The slower rise in price of goods towards the end of last year indicates that the sluggish economy was unlikely to recover in the last quarter of the year to boost the overall 2017 GDP growth number, research firm Stratlink Africa says in a new report.

The economy registered a year-on-year growth rate of 4.4 per cent in the third quarter of 2017, the slowest quarterly growth since the last three months of 2013.

It grew by 4.7 per cent and five per cent in the first and second quarters of last year respectively, meaning that a strong showing in the last quarter of the year would be necessary if it is to hit the Treasury’s projected five per cent growth for the full year.

“Headline inflation decelerating to a low 4.5 per cent in December from 4.7 per cent a month earlier provides an indication of subdued economic output thus curtailing hopes that resilient economic activity in the last three months of 2017 could boost annual GDP growth,” the January 2018 Africa Market update said.

READ: Kenya's economy records slowest first quarter growth in five years

The Kenya National Bureau of Statistics blamed the political uncertainty associated with the General Election coupled with a prolonged drought for the slowdown in the economy.

The fall of the headline inflation can also be traced to improved weather conditions in the second half of the year and a government food subsidy programme that brought down the price of flour.

Core inflation (non-food/non-fuel) also fell, however, from 5.4 per cent in 2016 to 3.9 per cent last year, indicative of reduced private sector spending and rate capping.
Inflation is, however, likely to rise in the short term due to higher fuel costs with the price of a litre of diesel and petrol at a 38 month high.