In March, the living cost in Kenya experienced a substantial decline due to a significant drop in inflation rates, the lowest in two years, largely attributed to a decrease in food prices. Comparatively, the inflation rates of the preceding two months hovered at 6.3% and 6.9%, signifying higher living costs.
Several food items such as maize flour and sugar fell in price, while the cost of specific products like onions and potatoes saw a considerable increase. Despite this variation in food items’ pricing patterns, the overall decrease in food prices greatly contributes to lower household expenditure.
The Energy sector also saw price fluctuations, with electricity costs minimally reduced, whilst housing, water, and fuel prices slightly increased. Other sectors displayed notable changes. For instance, the Transport sector saw a price rise largely due to increased vehicle costs, despite a decrease in airfares.
In contrast, the Food and Non-Alcoholic Beverages sector experienced a slight drop in the overall price of vegetables.
Decreased inflation affects Kenya’s economy
Interestingly, the price of fish and seafood significantly rose, marginally increasing the consumer price index for this sector.
The Transport Index fell, primarily due to a decrease in petrol and diesel charges, an effect of the increased use of electric vehicles across the world and global efforts for cleaner energy. Despite this dip, customers did not see a similar decrease in transportation costs, likely due to operational and maintenance costs incurred by transport companies.
Significantly, the Kenyan shilling appreciated against the US dollar, which is set to support cost reduction trends. This potent currency rate positively impacts the import industry and could make imported goods more affordable, potentially boosting profit margins for businesses. If import costs continue to decline, companies may invest more in operations, creating jobs and improving the overall economy.
It is projected that the strengthened shilling will reduce the cost for importers, reducing the cost of industry inputs and enhancing trade balance. With easing inflation and a stronger shilling, consumers are anticipated to benefit from lower goods prices. This could lead to higher employment rates and increased purchasing power. The strong shilling could also attract foreign investors and help the government reduce financial burdens by paying off international debts.
