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August inflation eases, offering Kenya’s economy much-needed kick

BUSINESS NEWS
By Paul Wafula | September 1st 2015

NAIROBI: The cost of living dropped in August despite a significant rise in fuel prices mid last month, the latest government data has shown.

 

The Kenya National Bureau of Statistics (KNBS) says overall inflation rate slowed down to 5.84 per cent in August, down from 6.62 per cent a month earlier. This now becomes the lowest inflation since February. The lowest inflation this year was recorded in January where the cost of living stood at 5.61 per cent.

KNBS Director General, Zachary Mwangi, says between July and August, food and non-alcoholic drinks’ index decreased by 0.26 per cent.

“This was mainly due to favourable weather conditions, which prevailed in recent months and the main reason for decreases in prices of several food items,” explained Mr Mwangi in the statement.

Lower inflation rate tends to increase the purchasing power of consumers, and this gives them the headroom to buy more goods and pay for additional services, hence stimulating the economy. During the review period, housing, water, electricity, gas and other fuel-related indices increased by 0.76 per cent.

“This was mainly attributed to net cost increases in respect of cooking fuels and other household utilities. The cost of electricity consumption for instance, surged up due to increases in both fuel cost adjustment and foreign exchange charges,” Mwangi indicated in his statement.

But despite a notable drop in the cost of diesel, the transport index increased by 1.42 per cent over the same period. This, KNBS explains, was mainly due to continued rise in the cost of petrol, fares and other transport costs.

Mid this month, the cost of a litre of super petrol went up by Sh4.06 after the Energy Regulatory Commission (ERC), the energy sector regulator, released the new monthly pump price review. ERC in the latest review also included a roads levy charge alongside levies to reflect the effects of a weaker shilling to the US dollar.

A litre of super petrol is cheapest in Mombasa and now retails at Sh99.32 and costliest at Mandera at Sh116.46, according to the latest pricing. Motorists in Nairobi, where the highest proportion of fuel is consumed, pay Sh102.65 for a litre of super petrol and Sh83.35 for diesel.

The KNBS consumer data is collected during the second and third weeks of the month under review. The latest prices were obtained from selected retail outlets in 25 data collection zones in Nairobi and 13 other urban centres.The slowdown in the cost of living now adds a breath of fresh air in the economy.

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