Expensive electricity and petrol prices lifted inflation for Nairobi’s rich and middle class homes in October as cheap food lowered Kenya’s cost of living measure to a 16-month low.
Official data shows that upper income earners and middle class in the capital city recorded a rise in inflation as poor households enjoyed a drop in step with softening food prices due to the recent rains.
Inflation for the rich rose to 2.90 per cent last month from 2.12 per cent in September while that of the middle class rose to 5.99 per cent from 5.55 per cent.
The poor’s inflation dropped to 6.9 per cent from 7.81 per cent in line with overall inflation that fell to 5.72 per cent last month from 7.06 per cent in September, driven by a fall in prices of some food items.
The difference in inflation levels among Nairobi’s income segments is linked to their different consumption habits. While the rich spend a larger share of their budget on transport, the middle class use their money on utilities and rent while food takes the bulk of the poor’s budget.
Rich homes in Nairobi spent 27.9 per cent of their budget on transport while utilities like electricity and rent formed the largest share of the middle class spend at 23.6 per cent.
Food consumes the bulk (42.5 per cent) of the poor’s monthly incomes, exposing them to diet inflation. Food takes seven per cent of the rich homes spend and 22 per cent for the middle class.
In October, food and non-alcoholic drinks’ index decreased by 1.78 per cent, offering relief to poor homes, but had little impact on the rich’s inflation.
Rent, gas, electricity and petrol prices have increased, hurting the rich and middle class homes. Electricity prices rose due to a higher forex charge in power bills while petrol remained on the rise in line with rising global prices.
Domestic power tariffs for middle class and rich homes are about four times higher compared to other income groups, exposing the rich to more costs when electricity rises.