Inflation For October Up To 4.8% From 4.2% In September

By Cytonn Investments / Published November 2, 2020 | 9:18 am

The year-to-year inflation for the month of October increased to 4.8 percent from the 4.2 percent recorded in September 2020.

During the month, there was a 1.1 percent increase in the Food and Non-Alcoholic Drinks Index, mainly contributed by an increase in prices of carrot, mutton, and wheat flour (white) by 0.9,0.8, and 0.8 percent respectively, among other food items.

There was also a 0.9 percent increase in Housing, Water and Electricity, Gas and Other Fuels Index, mainly attributed to an increase in the cost of; cooking fuels, kerosene which increased by 0.7 percent, and electricity which increased by 3.2 percent per 200 Kwh.

There was a 0.6 percent increase in the Transport Index, mainly driven by an increase in the price of petrol by 1.7 percent, outweighing the decline in diesel prices of 1.7 percent.

“Going forward, we expect the inflation rate to remain within the government’s set range of 2.5 – 7.5 percent despite supply-side disruption due to an anticipated second-wave of COVID-19 infections and subsequent lockdown restrictions,” said Cytonn Investments.

The Kenyan Shilling

During the month, the Kenya Shilling depreciated by 0.3 percent against the US Dollar to close at 108.8 shillings from 108.5 shillings recorded at the end of September.

The slight depreciation was mostly attributable to the increased dollar demand from oil and merchandise importers amidst lackluster dollar inflows.

During the week, the Kenya Shilling remained relatively stable to close the week at 108.8 shillings. On a YTD basis, the shilling has depreciated by 7.4 percent against the dollar, in comparison to the 0.5 percent appreciation in 2019.

The shillings will get support from the Forex reserves which are currently at USD 8.1 bn, which is above the statutory requirement of maintaining at least 4.0-months of import cover, and the EAC region’s convergence criteria of 4.5-months of import cover.

There is a relatively strong Diaspora remittance increased by 21.4 percent to USD 260.7 mn in September 2020 compared to USD 214.7 mn in September 2019. The September inflows were 5.0 percent lower than the USD 274.1 mn in August 2020.

There is an improving current account position which has seen a 39.9 percent decline during Q2’2020, coming in at 82.2 billion shillings, from 136.9 billion shillings in Q2’2019, equivalent to 7.0 percent of GDP from the 10.9 percent of GDP recorded in Q2’2019.