NAIROBI, Jan. 9 (Xinhua) -- A stable shilling enabled manufacturers to import raw materials at lower cost in the last quarter of 2016, pushing down Kenya's producer price inflation to the negative territory for the first time in four years.
The inflation fell from 6.8 percent at the end of 2015 to negative 0.5 percent in the last quarter of 2016, official government data showed Monday.
"The year-on-year change was negative 0.47 percent. The stable exchange rate of the Kenya shilling against major foreign currencies led to the slow increase in year-on-year producer prices," said the Kenya National Bureau of Statistics (KNBS).
The last time a negative producer price inflation was recorded was in the fourth quarter of 2012. The statistics agency attributed the decline to lower producer prices of manufacture of cocoa, chocolate and sugar confectionery, tea, knitted and crocheted fabrics.
But even as year-to-year produce price inflation fell, prices in the fourth quarter increased by 1.79 percent compared to the previous quarter mainly due to rises in the manufacture of food products, rubber, plastic and metal items.
"Producer prices of manufacture of textiles, mining and quarrying and manufacture of chemicals and chemical products declined over the same period," said KNBS, adding the price index of food products increased due to rise in prices of sugar, grain mill products and tea.
According to the Central Bank of Kenya, the shilling was relatively stable exchanging at between 100 and 102 against the U.S. dollar in 2016.
The banks' foreign exchange reserves averaged 7 billion dollars or the equivalent of 5 months' worth of import cover, enabling the apex bank to support the shilling, which only declined 0.1 percent last year.
However, analysts have warned that the shilling will face intense pressure in 2017 eating to foreign exchange reserves as CBK sells dollars to support it. The currency hit a 15-month low at the end of last week, trading at 103.6 against the dollar. Enditem
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