Lower inflation ups consumer spending in first quarter of 2025

Higher spending among consumers has been sustained across the first quarter of the year, with the latest ILAM Consumer Spending Index showing increased volumes in purchases made.

Compared to the previous index that covered the last quarter of 2024, the latest trend is motivated more by reduced prices rather than costly commodities.

The downward trend of inflation has been mentioned as a key driver of these expenditures.

The index released by ICEA LION Asset Management also shows a change compared to last quarter in the segment of the economy where increased incomes were reported.

In the previous index, real estate recorded increased incomes and likewise spending, while in the latest, the education and training sector is the one where individuals made more money over the period.

ICEA LION Asset Management Data Scientist Peninah Mutitu attributed the increase to side hustles and job-hopping.

“Workers from the educational sector attributed their increase in income to changing their jobs from public to private schools, doing side hustles like online tutoring, and also farming,” she said.

School expenses

The greatest decrease in income was reported by individuals in the wholesale and retail sector (45 per cent), followed by hotel, tourism and leisure (40 per cent) and manufacturing and trade (32 per cent).

The index shows that individual spending over the period remained unchanged from the previous quarter, with 79 per cent of the respondents reporting an increase in spending and 21 per cent citing a decrease.

A big chunk of the spending, more than 40 per cent, went to shelter, food, basic clothing, school expenses and commuting to work.

“For the first time since the index’s inception in 2023, higher consumer spending was primarily due to ="https://www.standardmedia.co.ke/business/business/article/2001512853/february-inflation-rate-rises-to-35-per-cent">increased purchase volumes< rather than rising prices,” says ICEA LION Asset Management.

It adds: “Workers in the education and training sectors reported the highest spending increases.

The hospitality sector recorded the highest proportion of employees with reduced spending.”

Judd Murigi, Head of Research ICEA LION Asset Management, noted that inflation had a role to play in the increased spending when the numbers are compared to first quarter of 2024.

“Inflation has been lower than it was last year, and also in some instances, we noticed that prices of some items like cooking had actually come down. Sugar reduced as well. That could be a driver of the higher volumes being purchased,” he explained.

Higher sales

Compared to 2025 when the year opened with an inflation of 3.3 per cent, this figure stood at 6.9 per cent.

Inflation now stands at 3.6 per cent compared to 5.7 per cent in the same period in 2024.

On the retail side, the index shows that the trend remains consistent with 57 per cent of ="https://www.standardmedia.co.ke/business/business/article/2001514780/inflation-top-issue-for-local-ceos-in-2025">businesses reporting higher sales< in the first quarter of the year, compared to the same period in 2024. This is while 43 per cent experienced lower sales.

“Apparel stores had the most notable drop in sales trends while retail shopping stores and food and beverage outlets recorded the most improved sales trend,” the index says.

“Sales increases were mainly attributed to more customers, rather than price hikes.”