Irony of low inflation but empty pockets

Kenya’s inflation rate dropped further to 2.7 per cent in October, even as the cost of living continues to skyrocket amidst enhanced taxes imposed by the government.

The latest Consumer Price Index (CPI) published by the Kenya National Bureau of Statistics (KNBS) shows that in the last 12 months ending October 2024, the inflation rate has dropped by 4.2 per cent.

But on the flip side, Kenyans have had their income squeezed further with enhanced taxes among them - the Social Health Insurance Fund (SHIF) that has been affected starting October 1, 2024, and the housing levy, which exacerbates the cost of living. SHIF deducts 2.75 per cent of gross pay unlike the defunct National Health Insurance Fund (NHIF) which had a limit of Sh1,700.

According to the CPI numbers, the inflation rate reduced from 3.6 per cent in September to 2.7 per cent in October as a result of a drop in the prices of housing, water, electricity, gas and other fuels. There was also a drop in transport which is explained by revised fuel prices that have been gradually dropping from the Sh200 mark it crossed in September 2023.

These two indices (housing, water, electricity, gas and other fuels, and transport) are the only ones that registered a drop within one month.

In the October cycle,  petrol prices dropped by Sh8 to retail at Sh180 per litre, while diesel is now below Sh170 having dropped by Sh3.

“The year-on-year inflation rate as measured by CPI eased to 2.7 per cent in October 2024. The price increase was mainly driven by the rise in prices of commodities under food and non-alcoholic beverages, and housing, water, electricity, gas and other fuels,” the release says.

“However, the commodity prices transport sector declined by 1.3 per cent between October 2023 and October 2024.” KNBS noted that the food and non-alcoholic beverages index increased by 0.5 per cent between September 2024 and October 2024 citing prices of mangoes, oranges, and carrots which rose by 9.9, 5.1 and 5.7 per cent respectively. “Prices of sugar, maize flour sifted and fortified maize flour decreased by 2.3, 1.8 and 1.7 respectively between September 2024 and October 2024,” says KNBS.

A kilo of mangoes increased from Sh122 in September to Sh134 in October. Carrots went up from Sh105 to Sh111 and oranges moved to Sh103 from Sh98. During the period, housing, water, electricity, gas and other fuels index dropped by 0.3 per cent which KNBS attributes to a decrease in the prices  of kerosene and LPG (liquid petroleum gas) by 4.3 per cent and 0.4 per cent respectively.

“During the same period, however, prices of 50kWh and 200kWh of electricity increased by 0.3 per cent and 0.2 per cent respectively,” it adds.

“Transport index declined by 0.3 per cent between September 2024 and October 2024. This was mainly due to a decrease in prices of petrol and diesel by 4.3 per cent and 2.0 per cent respectively.”