Markets and Finance
Construction slows to 4.3% as demand for raw materials softens
Tuesday, January 03, 2023
Cement consumption declined in Q3 2022. Photo | NMG
Growth in the construction sector slowed in the third quarter of 2022 on the back of lower cement consumption and imports of building raw materials.
Industry growth has slowed from a recorded 6.7% in the nine months to September 2021 to 4.3% in the same period in 2022.
“The slowdown in growth was reflected in cement consumption and imports of construction materials,” the Kenya National Bureau of Statistics said in its latest report.
Read: Construction material prices skyrocket
Cement consumption decreased by 14.6% from 2,596.8 thousand tonnes to 2,217.7 thousand tonnes in the quarter.
This is the result of a drop in construction activity, including by the government and other developers, in the quarter just after the general election.
The country’s economic growth has also slowed on the back of rising inflationary pressures and concerns about the August election, according to the statistics office.
Official data from KNBS revealed that the volume of steel imports fell from 274,134 tons in the third quarter of 2021 to 198,849 tons during the period covered.
“Furthermore, the amount of bitumen imported has decreased from 36,762 tons in the third quarter of 2021 to 24,930 tons during the survey period,” KNBS said in its latest report.
Bituminous materials are used in road construction, roofing, waterproofing, and other applications due to the material’s adhesive properties.
Declining cement production strained the manufacturing sector.
The sector grew 2.4% in the third quarter of 2022 compared to 10.2% growth in the same period in 2021.
This is due to local assembly of vehicles and increased processing of coffee and sugar.
Sugar production increased by 6.1% from 166,994.0 tonnes reported in the third quarter of 2021 to 177,126.4 tonnes for the period covered.
Complete vehicle production increased 12.7% from 2,933 in Q3 2021 to 3,304 in Q3 2021.
“However, growth in this sector was restrained by a decline in cement production from 2,640.2 thousand tons in the third quarter of 2021 to 2,302.7 tons during the study period,” the KNBS statement read in part.
Cement production declined due to low demand caused by high inflation.
Read: Land prices in Nairobi account for 60% of construction costs
Runaway inflation and low shillings have reduced consumer purchasing power and reduced demand for goods and services.
The average inflation rate over the last 12 months was 8.7% in the July-September quarter, compared with 6.7% in the same period last year.
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