Kenya's cost of living index drops to its lowest level in 13 months amid falling food and energy prices

Kenya's cost of living index declined by 60 basis points to 7.3% in July, the lowest level in 13 months.
Lower prices for housing, water, electricity, and gas contribute to the decrease, bringing inflation below the government's target for the first time in over 13 months.
Food, energy, and transportation costs, which constitute over 57% of family budgets, play a significant role in the index decline.

Kenya's cost of living index declined in July to its lowest level in 13 months as a result of moderated prices for several food items and falling energy costs. As a result of lower prices for housing, water, electricity, and gas, inflation fell below the government's target for the first time in over 13 months.

The index decreased by 60 basis points, from 7.9% in June to 7.3%, as the nation's inflation slowed and moved closer to the Central Bank's goal range.

The recommended range for inflation, according to the Central Bank of Kenya, is 2.5% to 7.5% over the medium term. The central bank upped its benchmark lending rate to 10.5% from 9.5% just one month earlier, citing persistent inflationary pressure.

LPG saw the highest year-over-year reduction, at 10.1%, followed by tomatoes at 9.8%, while matatu fares experienced the sharpest spike, at 40.0%, according to statistics from the Kenya National Bureau of Statistics.

Between June 2023 and July 2023, the month-to-month Food and Non-Alcoholic Beverages Index fell by 0.5%, providing Kenyans who had been struggling with high food prices with some relief. “The Housing, Water, Electricity, Gas and Other Fuels' index, decreased by 1.2% between June 2023 and July 2023,” said KNBS in a statement.

The price decreases of electricity and cooking gas (LPG) are mostly to blame for the dip. Between June 2023 and July 2023, the prices of 13 kg of gas, 200 kg of electricity, and 50 kg of electricity declined by 9.2, 5.3, and 4.4%, respectively, during the review period. A 13KG cooking gas cost less in July 2023 than it did in July 2022, falling from Sh3,100 to Sh2,787.

However, the 5.0% increase in kerosene had minimal impact on inflation. Food, energy, and transportation prices, which together make up over 57% of family budgets, significantly contributed to the decline. The Transport Index went up by 3.5 percent between June 2023 and July 2023 mainly due to an increase in prices of petrol and diesel, which rose by 6.9 percent and 7.4 percent, respectively.

Kenyans have been suffering from rising prices as well as a severe decline in the value of the local shilling relative to the US dollar, which has driven up the cost of goods. The dip comes as a welcome respite at this time. However, Kenyans should prepare for a tighter economy as the finance act is due to be enacted.