Economy

Falling fuel, food prices cut inflation to 17-month low

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The data show that the prices of key food items such as maize flour, onions, potatoes and cabbages have been falling together with petroleum costs. PHOTO | FILE

Inflation eased to a 17-month low in December, helped by falling food and fuel prices.

Data from the Kenya National Bureau of Statistics (KNBS) show that the cost of living measure stood at 6.02 per cent, down from 6.09 per cent last month. This is the fourth month in a row that inflation has dropped since it hit a 25–month high of 8.36 per cent in August.

The data show that the prices of key food items such as maize flour, onions, potatoes and cabbages have been falling together with petroleum costs.

The drop in crude oil prices following a glut in the international market has offered relief to fuel consumers given that petroleum products have dropped to levels last seen in August 2012.

The drop in prices of food and fuel and which have significant weight on household budgets, looks set to embolden policy makers’ resolve to keep inflation within the government’s preferred target of between 3.5 per cent and 7.5 per cent. At 6.02 per cent, the cost of living measure is the lowest since July last year when it stood at 6.02 per cent.

Some brands of the two-kilogramme packet of maize flour have dropped to below Sh100 from an average of Sh118 in May on increased supply of maize following harvest in the Rift Valley.

The price of maize has a big effect on inflation given that it accounts for a significant share of poor households’ budgets. The cost of a 90-kilogramme bag of maize has dropped to Sh1,800 from Sh3, 200 in May, offering millers room to cut flour prices. Flour prices stood at Sh118 in May.

A kilogramme of cabbages is down to Sh29.14 from Sh50.25 last December while a similar quantity of potatoes is down five shillings to Sh46.39.

Fuel also influences the cost of living measure in an economy which depends heavily on diesel for transport, power generation and agriculture, while kerosene is used in many households for lighting and cooking.

A litre of diesel is now Sh91.79 from Sh105.39 in December last year while petrol has shed eight shillings to Sh102.86 in the same period.

Kenyans face disappointment over electricity prices that have shown little change between now and last December despite the injection of 280 megawatts of geothermal power into the national grid, with 140 megawatts added in late July and 70 megawatts in September and 70 megawatts in late November.

Though the additional cheaper geothermal has cut electricity costs by nearly 30 per cent since August for low consumers, the power expenses have increased marginally when compared over a one year period.

KNBS data show that consumers using 50 kilowatt hour (kWh) paid Sh521 this month compared to Sh517 in December last year. Businesses have complained that expensive power makes Kenya’s products uncompetitive.

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