Cost of living index drops further as year closes

Tomatoes traders wait for customers at Nakuru's Wakulima Market. PHOTO | AYUB MUIYURO | NMG
Tomatoes traders wait for customers at Nakuru's Wakulima Market. PHOTO | AYUB MUIYURO | NMG 

Inflation in December dropped to a 55-month low of 4.5 per cent, helped by softening food prices, as analysts project that the key index will fall further in the first half of 2018.

This marks the fourth drop in a row from 4.73 per cent last month and 8.04 per cent in August, where it stood above the government’s preferred ceiling target, hurting low income homes.

“The year on year food inflation dropped from 5.79 per cent in November to 4.68 per cent in December 2017,” the Kenya National Bureau of Statistics (KNBS) said in a statement Friday.

The slowdown in the cost of living measure comes amid government subsidies on maize flour, Kenya’s staple, in the wake of a biting drought that pushed up prices, prompting State intervention.

The government has however announced that the six-month import subsidy will come to an end this week, meaning prices are set to go up again in the New Year.

Main driver

Food takes up the largest share (36 per cent) of the basket of goods that is used to calculate inflation, making it the main driver of the cost of living, followed by utilities such as rent, water, electricity, gas and fuels at 18 per cent.

Some food items that recorded drops in December include tomatoes and sugar while chicken, fish and beef rose in the festive month but the impact was cancelled out by drops in the other food prices.

KNBS said transport costs were on the climb, in response to rising fuel pump prices and operators hiking fares over the holiday, but had a minimal impact on households’ budgets.

At 4.5 per cent, the December inflation is within the Central Bank of Kenya (CBK) preferred range of between 2.5 per cent and 7.5 per cent.

It’s the lowest level since May 2013 when it stood at 4.05 per cent.