August CPI Growth Rate and Breakdown
Kenya National Bureau of Statistics (KNBS) announced on August 29 that the Consumer Price Index (CPI) growth rate for August 2025 was 4.5% year-on-year. This shows a continued acceleration trend from 2.7% in October 2024, reflecting mounting inflationary pressures.
CPI Growth Rates by Major Category:
- Food and beverages: 8.3% (highest)
- Transport: 4.4%
- Alcoholic beverages and tobacco: 3.4%
- Clothing and footwear: 3.3%
Background of Inflation Acceleration
While the CPI growth rate had declined to 2.7% in October 2024, it has since accelerated, partly influenced by the Central Bank of Kenya policy rate cuts. The high 8.3% growth rate in food and beverages is a major factor pushing up overall inflation.
Manufacturing Sector Sentiment
Stanbic Bank Kenya announced on September 3 that the August Manufacturing Purchasing Managers Index (PMI) was 49.4, marking the fourth consecutive month below the 50 threshold that indicates economic expansion.
Detailed Manufacturing PMI Analysis:
- August PMI: 49.4 (recovered from July significant decline)
- Business sentiment: Remained subdued
- Production volume: Declined more significantly than new orders
- Factors: Low disposable income and harsh economic conditions
Bank economist Christopher Legilisho analyzed that while August recovered from July sharp decline, business sentiment remained subdued. Production volume declined more significantly than new orders due to low disposable income and harsh economic conditions, confirming manufacturing sector weakness.
Economic Policy Implications
The contradictory economic indicators of continued inflation rate increases and manufacturing PMI weakness highlight Kenya complex economic situation. While central bank policy rate cuts contributed to inflation acceleration, manufacturing sector sentiment has not improved, demonstrating the difficulty of monetary policy management.