Consumer purchasing power dipped to a five-year low in the last quarter of 2017 saddled by a stagnation of personal earnings, a steep rise in inflation and prolonged drought, according to a newly-released market report.
The Nielsen Consumer Confidence and Spending Intentions survey found that customer confidence dropped six per cent to 94 per cent in the last quarter of 2017, the lowest level recorded since the first study was conducted in 2013.
The survey measures customer’s degree of optimism about the overall state of the economy and personal financial conditions. Nielsen is a global information and measurement company.
The survey found that people’s sentiments around personal finances and job prospects also dropped six per cent each to stand at 58 per cent and 42 per cent respectively in the last quarter of 2017.
Kenya also recorded a drastic drop in immediate-spending intentions, with the majority (73 per cent), stating that “now is not a good time to use money.”
Bryan Sun, the managing partner for Nielsen East and South Africa, said prolonged electioneering, drought, and a credit cap had resulted in a decline in consumer sentiment.
“Rapidly rising inflation has also driven food prices to five-year highs, plaguing consumers and retail trading conditions,” he said. Mr Sun said the conditions had made consumers less confident about their personal finances, their spare cash limited and their mindset staying cautionary, with most opting to save rather than spend.
The survey also found that the tough economic times had forced most Kenyans (70 per cent) to hinge their buying decisions on price competitiveness.
Recommendations from friends, family and retailers, when faced with new products, was also a great buying influencer.
The Kenya National Bureau of Statistics data shows that more than half of formal sector workers (64 per cent) are living on low wages of between Sh20,000 and Sh49,000 and that the wages have barely increased in the past 10 years, weakening their purchasing power.
The data shows that employees got a paltry 0.1 per cent growth in average take-home pay in the financial year ended June 30, 2017 after adjusting to inflation.
“Availability has also become more important, as retailers struggle due to limited access to credit, to manage their stock supply. This means consumers must settle for what products are available in store. In addition, the most interesting factor is the changing trust relationship,” the Nielsen report says. “….what is becoming prominent is the increasing importance of recommendations from friends, family and retailers when faced with brands they may not know.”