Several factors are driving the growth performance. After a prolonged drought spell that has slowed growth of agricultural sector, the expected enhanced rains during the short rains season could see the sector bounce back. That said, the prolonged electioneering period could adversely impact on economic activity in the third and fourth quarters of 2017 especially as investors adopt a wait and see attitude. While the stock index is on an upward trend, with a significant proportion of trading dominated by foreign investors and more so on the selling side, it is uncertain that the trend predicts a prospective future (figure 1). The continued growth in cement consumption, albeit slowing in the recent period, is attributable to the growing construction industry which reflects a persisting investors’ confidence that needs to be secured. The increase in energy consumption while reflecting on the Last Mile Connectivity Project, which is geared towards increasing low voltage electricity access to households within 600 meter radius from a transformer, also indicates the potential that this project is having in expanding economic activity (figure 2). The wildebeest north-bound migration from Serengeti National Park in Tanzania crossing the Mara River in Maasai Mara game reserve in Kenya is expected to see a pick in tourist arrivals this month sustaining the recovery of tourism sector. However, coffee exports are slowing given that we are in the low harvest season which is usually between June to December (figure 2). Volumes of tea exports declined in March to May 2017 mainly due to dry and hot weather experienced in all tea growing areas in the country.


Inflationary pressure has eased with the rains, but inflation is yet to be sustained within the government target range (3% to 7%). The overall inflation increased from 7.47 per cent registered in July 2017, to 8.04 per cent in August 2017 (figure 1) attributed to depressed supply of food in the market during the election period. This saw notable increase between July and August in prices of Tomatoes (14.1%), Spinach (6.0%) and Carrots (4.5%); and moderate rise in prices of Wheat flour (1.2%), Rice (1.1%) and Irish Potatoes (0.7%). The decline in prices of Maize grain (-7.8%) and Maize flour (-0.8%) is attributed to ongoing government interventions in Maize imports. The prices of beans and milk reduced by 0.9 per cent and 0.6 per cent respectively, due to improved weather and supply in the market. A similar picture is depicted by the wholesale prices (figure 3).


Figure 1: Trends in Economic Performance, Inflation and Stock Market

Data source: CBK, KNBS


Figure 2: Trends in Key Economic Performance Indicators

Data source: KNBS


Figure 3: Trends in Monthly Wholesale Food Prices

Data source: Wholesale prices, Ministry of Agriculture