Consumers pay more as cost of living hits 19-month high

The cost of living hit a 19-month high in April after inflation rate jumped to 6.58 per cent, the highest since September 2017.

The Kenya National Bureau of Statistics (KNBS) in its monthly updates yesterday said the rise was due to an increase in food prices, pushed up by drought, which has ravaged the country since last year.

“Between March and April 2019, food and non-alcoholic drinks’ index increased by 6.86 per cent. This increase was mainly due to drought conditions, which prevailed in the better part of April 2019, causing upsurge in the costs of some foodstuffs,” KNBS director general Zackary Mwangi said in a statement explaining the latest numbers.

The delay in short rains did not help the situation, given that the bulk of the country relies on rain-fed agriculture.

Inflation started changing its course last month when it reversed its downward trend to increase to 4.35 per cent.

If the current rise goes on, then it will shoot beyond the government’s target of 7 per cent. The last time inflation was above 6.58 per cent was in September 2017, when it stood at 7.06 per cent.

Inflation indicates the cost of living and a high rate means that consumers have lost their spending power, with the reverse holding the same. Sifted maize flour, kales (sukuma wiki), potatoes, loose maize grain and flour as well as tomatoes recorded increases of 29.82, 25.3, 19.27, 26.14, 15.90 and 15.31 respectively in April, compared to March 2019.

“These six items alone account for 6.25 per cent of the CPI weight. However, prices of sugar and some other food items were observed to be lower in April 2019 than in march 2019,” KNBS said yesterday.

Housing, water, electricity, gas and other fuels’ index also increased by 0.93 per cent in April compared to March 2019, mainly due to higher house rent and electricity.

“The transport index increased by 0.86 per cent, mainly on account of increase in pump prices of petrol and diesel,” Mr Mwangi added. Inflation is a critical figure for policy makers as it influences almost every financial decision that governments make from wage increases to tax projections.

It is also used by banks and other investors to determine how much they should ask for their deposits and a rise has a direct impact on the direction of the cost of credit.

Besides weakening the ability of consumers to spend more, high inflation rates would hurt several other industries, especially the manufacturing sector, given that consumers will only be left with enough money to buy food and postpone buying to a time in future when their spending power will have improved.

This would slow down the country’s economic growth engine, which pushed the GDP growth to 6.3 per cent last year.