November Inflation to Hit Over 5.5 Percent Recorded in September

The inflation rate for the month of November is expected to fall between 5.7 and 6.1 percent from 5.5 percent recorded in September, Cytonn Investments say.

The increase has been attributed to the base effect as well as the 2.1 percent increase in petrol prices to 118.1 shillings from 115.7 shillings per liter, alongside diesel prices, which increased by 2.8 percent to 112.8 shillings from 109.7 per liter from the previous month.

The changes in prices have been linked to the increase in average landing costs of imported super petrol by 4.0 percent to 758.3 US Dollars per ton in October from 729.0 dollars a ton in September.

Landing costs for diesel also increased by 5.8 percent to 741.3 dollars a ton in October from 700.4 dollars for the same capacity recorded in September. The price increase will directly affect transport costs and indirectly affect food prices in November.

The inflation rise is also due to the housing, water, electricity, gas and other fuels index. Kerosene prices increased by 2.7 percent to 111.8 shillings from 108.8 shillings recorded the previous month.

The increase in the prices of Kerosene can be attributed to the increase in landing costs of imported Kerosene by 5.8 percent to 763.5 US Dollars per ton in October from 721.6 dollars per ton in September.

However, electricity costs are expected to mitigate the rise in kerosene prices due to the reduction of electricity bills as per the released reviewed electricity tariffs by the Energy Regulatory Commission (ERC).

Electricity prices for households and businesses consuming a maximum of 100 units of power declined by 31.6 percent to 1,517 shillings in November from 2,219 shillings in October, after factoring in variable pass-through charges such as 16 percent VAT, fuel cost charge, forex levy, and inflation charge.

Meanwhile, the increase in Inflation is expected to be mitigated by a decline in the food and non- alcoholic beverages index, which has a weight of 36.0 percent. This is due to declined food prices mainly driven by a decline in grain products with the maize harvest having increased by 20.0 percent to 40.9 million bags from 34.0 million bags last year.

The Kenya National Bureau of Statistics (KNBS) expects inflation in H2’2018 to experience upward pressure but at a lower rate following the reduction in the rate of VAT charge on fuel to 8.0 percent from 16.0 percent, affirming the expectations of inflation for the year averaging within the government’s set target of 2.5 to 7.5 percent.