Kenyan Manufacturing Sector Slows in Second Quarter

The level of activity in the manufacturing sector in Kenya has remained largely subdued and is estimated to have expanded by 3.2 percent in the second quarter of 2016 compared to 5.1 percent in a similar period in 2015 according to data released by Kenya National Bureau of Statistics.

The slow growth in the manufacturing sector is mainly attributable to low level of activity in key sub-sectors. Specifically, the growth was supported by manufacture of beer and stout, manufacture of sugar. The performance was however dampened by a contraction in processing and preservation of fish, manufacture of edible fats and margarine, production of soft drinks, processing of maize meal, manufacture of bread and processing of wheat flour.

Despite growths in cement production and manufacture of galvanized sheets, the sector’s performance was also curtailed by a decline in the assembly of motor vehicles during the review period.

Performance of electricity and water supply remained strong during the second quarter of 2016 mainly owing to the continued substitution of the thermal electricity generation with the relatively cheaper sources such as hydro and geothermal sources coupled with favorable weather conditions experienced in the quarter during the second quarter.

Electricity generation from hydro and geothermal sources grew by 14.3 and 3.5, percent respectively, while that of thermal declined by 7.7 percent. Overall, the sector recorded a growth of 10.8 percent in the second quarter of 2016 compared to 9.2 percent growth in the same quarter of 2015.

The financial and insurance sector recorded a growth of 7.5 percent during the quarter under review compared to a growth of 7.7 percent registered in a similar period of 2015. During the review quarter, broad money supply (M3) expanded by 8.5 percent from 7,518.4 billion shillings during the second quarter 2015 to reach 8,155.2 billion shillings.

Total domestic credit increased by 14.7 percent during the review period compared to an increase of 19.5 percent in the same quarter of 2015. Credit to the private sector grew by 5.1 percent from 349.2 billion shillings in the second quarter of 2015 to 367.1 billion shillings in the second quarter of 2016.

Credit to the central government grew by 23.4 percent to stand at 722.1 billion shillings in the quarter under review. During the review period, the average 91 day T-bill interest rate was at 8.11 percent from 8.31 percent during the second quarter of 2015.

Interest rate on lending increased significantly in the second quarter of 2016 to reach an average of 18.15 percent compared to 15.57 percent in the second quarter of 2015. However, an average of interest rates on savings declined by 0.19 points, and dropped from 1.85 percent to 1.60 percent in the review period.

the main problem in Kenya is that we consume more than we produce.