Manufacturers raise prices on costly fuel, weak shilling

Dollar Shilling

A weak shilling has fuelled demand for the dollar at a time high global crude oil prices has pushed up.

Photo credit: File

Manufacturers raised prices of the commodities in October to cater to a shortage of raw materials, more expensive fuel, and a weak shilling.

The Markit Stanbic Bank Kenya Purchasing Managers' Index (PMI) said that there was a record rise in purchase costs in October, driven by rising fuel costs, a weaker currency, and material shortages.

Around 41percent of companies saw their purchase costs rise.

“The record increase in purchase costs led companies to raise their output charges sharply in October. Moreover, the pace of inflation accelerated to a four-month high” the PMI said.

The country’s inflation hit a 64-month-high of 9.6percent in October, elevated by expensive food, transport, and household commodity prices.

Fuel and electricity prices also climbed in October after the State partially removed the subsidy on petroleum prices earlier introduced by former President Uhuru Kenyatta to cushion households from the high cost of living.

Petrol prices for the period September 15 to October 14 hit a historic high of Sh179.3 per litre after the government opted not to apply a subsidy on the product. Diesel prices also hit a historic high of Sh165 per litre after the government increased its price by Sh25 per litre up from Sh140.03 even as that of kerosene jumped to Sh147.94 per litre after the Energy and Petroleum Regulatory Authority increased its cost by Sh20.

The country’s shilling has also weakened remarkably against the US dollar, resulting in the costly import of raw materials for manufacturers. The local currency exchanged at 121.45 yesterday against the dollar, according to indicative rates by the Central Bank of Kenya.

Stanbic said output expectations were up to their strongest for 15 months in October.

“Despite growth headwinds, companies were more confident of rising client numbers and business expansion plans coming to fruition,” Stanbic said.