Inflation rises for Nairobi’s rich on luxury imports
Imported cars await clearance at Mombasa port. PHOTO | KEVIN ODIT
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Nairobi's upper income earners record rise in living costs as the poor experience a drop.
The upward drift in prices of fuel and luxury imports exposed Nairobi’s rich families to the steepest inflation in July, the highest ever recorded this year, official data indicates.
The city’s upper income segment was the only class to record a rise in inflation as the lower and middle income portions experienced drops in sync with the national average.
Data from the Kenya National Bureau of Statistics (KNBS) shows that inflation for the wealthy homes rose to 2.95 per cent last month from 1.77 per cent in June and 2.05 per cent in January.
The differences in the inflation levels among income segments is linked to their different consumption habits, with the rich spending most of their income on utilities and transport while food takes the bulk of the poor’s budget.
“The upper class homes depend heavily on imported goods such as fuel which have been affected by the exchange rates,” said James Gatungu, director of production statistics at KNBS.
He said the cost of luxury imported goods had increased due to the weakening shilling against the US dollar, piling pressure on rich households who buy them more.
The shilling has been trading at three-year lows in recent months due to falling hard currency revenues from tourism, tea and horticulture — the key foreign exchange earners — amid a rising import bill.
The energy regulator last month raised the maximum fuel prices to the highest level this year due to the weak shilling, squeezing rich homes who spend the largest share of their monthly income on transport at 27.9 per cent.
Car prices have also increased by double digits over the past year, according to KNBS. Dealers attribute the increase to rising freight costs and a weak shilling.
The wealthy homes have been hit by tradable inflation — caused by fluctuations in global prices and exchange rates as opposed to domestic factors, said Mr Gatungu.
This explains why the cost of living measure for the rich rose while the national average eased to 6.62 per cent last month from 7.03 per cent in June, helped by dropping food prices.
KNBS data shows that inflation for city middle class eased to 4.22 per cent from 4.63 per cent in the period under review while that for lower income group dropped to 7.26 per cent from 7.32 per cent.
Nairobi’s middle class on average spend 12.4 per cent of their income on transport and 22 per cent on food.
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