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Consumers could see additional relief in retail prices after factory costs fell further in the final quarter of 2025, pushing producer costs to levels last recorded nearly three years ago.
The latest data from the Kenya National Bureau of Statistics (KNBS) show the Producer Price Index (PPI) dropped to 134.18 in the quarter ended December 2025, extending a fall that began earlier in the year.
“The year-on-year producer inflation rate recorded in December was -2.43 per cent, with the PPI reaching 134.18 during the same period,” KNBS says in a report.
The reading places producer prices at their lowest level since March 2023, when the index stood at 134.76, signalling sustained easing in production costs across key sectors of the economy.
Producer inflation tracks changes in prices received by manufacturers for their output and often acts as a signal of future movements in consumer prices, especially for goods with short supply chains.
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It shows price trends from the producers’ perspective, reflecting changes in production costs before they are passed to consumers.
In cases PPI is elevated, it translates to higher consumer prices as the manufacturers seek to recoup the additional cost incurred in production.
While businesses pass on increases in the cost of raw materials in the form of high retail prices, a fall in PPI does not usually guarantee reprieve to consumers.
This is mainly because businesses can opt to widen profit margins when the cost of raw materials drops.
KNBS data show producer prices declined across key industrial sectors during the quarter, reinforcing a trend of cooling cost pressures that has gathered pace since the second half of last year.
“Overall, quarter-on-quarter prices dropped by 0.44 per cent between September and December 2025,” it says.
“The manufacture of paper and paper products sub-sector recorded the highest quarter-on-quarter increase at 3.76 per cent, while the manufacture of fabricated metal products experienced a price decline by 2.74 per cent.”
The sustained fall in producer costs indicates continued softening in production expenses, partly supported by lower global commodity prices and a relatively stable local currency.
The easing producer costs come when the Central Bank of Kenya has maintained a relatively accommodative policy stance, effecting a sustained cut in the benchmark lending rate since August 2024 to support private-sector lending.
The country’s inflation rate closed last year at 4.5 per cent before dipping marginally in January 2026 to 4.4 per cent.
The rate has remained below the five per cent mark since July 2024.
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