September Inflation Hits 6.8% Driven By The Price Of Sukuma Wiki

The y/y inflation in September 2023 increased marginally by 0.1% points to 6.8%, from the 6.7% recorded in August 2023. This was in line but below our projections of an increase to within a range of 7.2% to 7.6%.

The headline inflation in September 2023 was majorly driven by an increase in prices of commodities in the following categories, food and non-alcoholic beverages; housing, water, electricity, gas, and other fuels, and transport.

The price of Food and Non-Alcoholic Beverages rose to 7.9% during the month. The m/m increase was mainly driven by the increase in prices of commodities such as potatoes, cabbages, and Kales (Sukuma-Wiki) of 18.4%, 7.4%, and 4.2%, respectively.

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However, the increase was weighed down by a decrease in prices of Maize flour-loose, maize flour-sifted, maize grain-loose, and wheat flour-white by 6.7%, 6.0%, 5.4%, and 3.6%, respectively.

Housing, Water, Electricity, Gas, and Other Fuel stood at 6.3 percent during the month. The m/m performance was mainly driven by the increase in prices of 13.0kg gas/LPG by 3.2%. However, there was a decrease in prices of Electricity of 200kWh and 50kWh by 2.1% and 2.5% respectively.

Transport costs increased to 13 percent. The m/m increase in the transport Index was mainly due to an increase in prices of nationwide bus fares on the back of the rise in the prices of petrol and diesel by 8.7% and 11.8%, respectively.

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Notably, the overall headline inflation remained within the Central Bank of Kenya (CBK) target range of 2.5% to 7.5% for the third consecutive month. The increase in headline inflation in September 2023 comes amid the recent rise in fuel prices which increased by 8.7%, 11.8%, and 19.4% to Kshs 211.6, Kshs 200.6, and Kshs 202.6, per liter of Super Petrol, Diesel and Kerosene, respectively, for the period between 15th September 2023 to 14th October 2023.

The high commodity prices in the country are also attributed to the sustained depreciation of the Kenya Shilling having depreciated by 20.0% against the US dollar on a Year-To-Date (YTD) basis resulting in inflated import bills.

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As a result, manufacturers pass on the cost to consumers through a hike in consumer prices. Going forward, we expect inflationary pressures to persist in the short term mainly on the back of the high fuel prices, with fuel being a major input in most businesses, the cost of production is expected to remain elevated.

However, we expect the measures taken by the government to subsidize major inputs of agricultural production such as fertilizers to lower the cost of farm inputs and the continuous efforts by the government to stabilize fuel prices will support the easing of inflation in both the short and long term.

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Stats from Cytonn Report.