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Economy

Inflation bites hard at Nairobi’s middle class

Commuters rush to board a bus at Kencom terminus during a strike by public service vehicle operators. Rising transport costs have added to Nairobi middle class’s deepening inflation pain. PHOTO | FILE
Commuters rush to board a bus at Kencom terminus during a strike by public service vehicle operators. Rising transport costs have added to Nairobi middle class’s deepening inflation pain. PHOTO | FILE 

Inflation for Nairobi’s middle class jumped by the biggest margin last month among income classes on rising rent and transport costs.

Data from the Kenya National Bureau of Statistics (KNBS) shows inflation for the middle income group rose to 4.63 per cent in June from 3.76 per cent the previous month — representing a 0.87 percentage increase.

The cost of living measure for the city’s wealthy dropped by 0.09 percentage point to 1.77 per cent while that of low-income earners rose by 0.34 percentage point to 7.32 per cent.

The differences in the inflation levels among income segments is linked to their different consumption patterns, with the rich spending most of their income on utilities and transport while food takes the largest share of the poor’s budget.

“Transport and 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.

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“For instance, under transport, the cost of international flight, petrol and city bus/matatu affected the middle-income group more than the other groups,” he added.

The energy regulator raised fuel pump prices last month to the highest level this year, due to rising prices of imported oil and a weaker shilling against the dollar.

Nairobi’s middle class on average spendS 12.4 per cent of their income on transport and 22 per cent on food, whose prices eased marginally last month. Rent and other utilities account for 23.6 per cent of their spending.

“Over the same period, housing, water, electricity, gas and other fuels’ index increased by 0.37 per cent mainly due to cost increases in respect of house rents, cooking fuels and other utilities,” said KNBS in a statement.

Poor homes spend the largest share of their income on food at 42.5 per cent, rent and utilities (18.2 per cent) and 6.9 per cent on transport, meaning they are least exposed to rising motoring expenses.

A recent survey by property consultant firm Hass Property indicated that home prices in Nairobi remained little changed while rents maintained an upward trend.

The KNBS defines low-income earners as those spending less than Sh23,670 monthly, middle class (between Sh23,671 and Sh120,000) and upper income as households with expenses in excess of Sh120,000.

Overall, Kenya’s inflation inched up to 7.03 per cent last month from 6.87 per cent in May pushed by rising fuel prices and a weaker shilling against the dollar.

Fuel, especially diesel, is a key driver of inflation since it powers industries, trucks distributing goods and agricultural machinery, meaning prices changes have a direct effect on commodity prices.

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