The latest data from the Kenya National Bureau of Statistics (KNBS) reveals a paradox in the country’s economic landscape: while inflation rates have declined, the prices of key commodities have continued to rise, squeezing the wallets of Kenyan consumers. Despite the inflation rate dropping to 4.4 percent in August 2024 from 6.7 percent the previous year, the cost of goods and services has increased, with the Consumer Price Index (CPI) climbing from 134.02 points in August 2023 to 139.87 points in August 2024.
The CPI measures the average change in prices over time for a basket of goods and services commonly purchased by households, serving as a key indicator of inflation. It reflects how much the cost of living is rising or falling by comparing the current price of this basket to the price in the previous base year. The rise in the CPI over the last year, despite the drop in inflation, indicates that prices have not eased in tandem with the overall inflation rate.
In practical terms, this means that the purchasing power of Kenyans has diminished even with lower inflation. A product that cost Sh100 in August 2023 would now cost Sh105.85, an increase of 5.85 percent, despite the reported decline in inflation. This highlights the disconnect between the statistical inflation rate and the real-world experiences of consumers.
Food Prices on the Rise
One of the significant drivers of the increased cost of living has been the rise in food prices. For instance, the price of a kilogram of tomatoes, which cost Sh74.18 in 2023, has jumped to Sh86.84 in August 2024, marking a significant increase that directly impacts households. Similarly, other essential items have seen price hikes, contributing to the strain on household budgets.
However, not all commodities have seen an upward trend in prices. A kilogram of sugar, which retailed at Sh218.25 last year, has dropped to Sh158.19 in August 2024, providing some relief to consumers. Despite this decrease, the overall trend indicates rising costs across most categories of goods and services.
Key Drivers of Price Increases
According to KNBS, the year-on-year inflation rate, as measured by the CPI, was 4.4 percent in August 2024. This figure represents the general price level being 4.4 percent higher than it was in August 2023. The main contributors to the price increase were commodities under Food and Non-Alcoholic Beverages (5.3 percent); Housing, Water, Electricity, Gas, and other fuels (4.2 percent); and Transport (3.9 percent) between August 2023 and August 2024. These three divisions alone account for over 57 percent of the weights of the 13 broad categories used in the CPI calculation.
Additionally, the year-on-year index for alcoholic beverages, tobacco, and narcotics rose by 8.2 percent, further contributing to the overall increase in living costs. These categories’ price rises have had a substantial impact, given their significant weighting in the overall calculation of the CPI.
Understanding the Data
The CPI and inflation figures are generated from data collected through a monthly survey of retail prices, which targets a representative basket of household consumption goods and services. Data collection is conducted in the second and third weeks of the month from a sample of outlets across 50 data collection zones nationwide. This approach ensures a comprehensive snapshot of the price trends affecting the average Kenyan consumer.
The disparity between the declining inflation rate and the rising CPI suggests that while the overall pace of price increases has slowed, the cost of living continues to climb, affecting household budgets. This discrepancy underscores the need for targeted measures to address the specific factors driving up prices, particularly in essential categories like food, housing, and transport.
Conclusion
The recent data from KNBS serves as a reminder that a lower inflation rate does not necessarily equate to lower prices. The rising cost of living, as evidenced by the increased CPI, continues to challenge Kenyan households. As prices for essentials like food and housing remain high, the economic burden on consumers persists, highlighting the complex dynamics of inflation and the cost of living.
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