Nairobi’s middle class inflation up to 27-month high

Nairobi’s middle class bore the burden of rising cost of living as appetite for decent housing, beer and processed food pushed the segment’s inflation rate to a 27-month high.

Official data shows that inflation for the middle income group rose from 5.03 per cent in November to 7.09 per cent last month — the highest rate since September 2013.

The difference in inflation levels among Nairobi’s income segments is linked to their different consumption habits.

While the rich spend most of their income on transport, the middle class do on utilities and rent while food takes the bulk of the poor’s budget.

The cost of living measure for the city’s middle class homes rose by the highest margin in December, highlighting the squeeze on their budgets, according to Kenya National Bureau of Statistics (KNBS) data.

“Rising rent, beer and higher prices of food from restaurants and hotels had the highest impact on the middle income group compared to the other categories,” KNBS director of production statistics James Gatungu said.

Middle class homes spend the bulk of their monthly income (23.6 per cent) on housing and utilities, followed by food at 22 per cent, exposing them to rising costs.

Beer prices on average rose to Sh155 a bottle last month from Sh136 the previous month following introduction of higher taxes.

Two-bedroom flats, preferred by middle-class homes, have experienced the fastest rise in rent over the past one year.

READ: Two-bedroom flats tenants feel rent rise pinch

The KNBS data puts the average rent of a two-bedroom flat at Sh19,983 per month in December up from Sh18,777 same month in 2014 reflecting a growth of 6.4 per cent.

This growth is higher than that of a three-bedroom maisonette, preferred by rich homes, whose monthly rent is up four per cent to Sh32,605.

Inflation for the middle class rose by 2.06 percentage points while that of upper income homes increased by 1.45 percentage points to 4.83 per cent. Inflation for poor homes was at 8.70 per cent, having risen marginally by 0.1 percentage points.

Overall, Kenya’s inflation hit a 16-month high of 8.01 per cent in December, lifted by rising food prices on poor supply following heavy El Niño rains that damaged crops and washed away some roads, cutting off farmers from markets.

Even though electricity, fuel and cooking gas prices dropped last month, the benefits were offset by rising food and rent costs.

Rent and utilities take up 18.2 per cent of the poor’s budgets.

The KNBS defines low-income earners as those spending less than Sh23,670 monthly, the middle class as those spending between Sh23,671 and Sh120,000 a month and the upper income group (above Sh120,000).