August 2024 Consumer Prices: Inflation Ticks 4.4% As Fuel Outpaces Food Prices

In August 2024, the general prices of goods and services increased by 4.4% y/y, a slightly faster increase compared to the 4.3% rise recorded in July 2024, and came in slightly above our estimates.

The performance followed a deceleration in food inflation and a marginal rise in fuel inflation – the major determinants of the overall direction of prices.

Meanwhile, core inflation rose to 3.5%, from 3.3% in July but remained in line with 2024 average year to date.

The increase in fuel inflation was driven by higher prices of gas (+18.8%), despite steady fuel prices and lower electricity prices. On the other hand, food inflation declined despite higher costs of vegetables and fruits.

On a month-on-month basis, all the indices recorded an increase, save for the food and non-alcoholic beverages, resulting to a steady m/m inflation.

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“In the short term, we anticipate the annual inflation rate to stay steady around the midpoint of the CBK’s target range. Despite a challenging credit rating, the Kenyan shilling has remained stable within the resistance range of KES 128 to KES 135 against the dollar, helping to mitigate the risk of imported inflation.

As we await the Supreme Court’s judgment on the Finance Act 2023, we believe that a negative outcome (nullification) could significantly impact inflation, particularly due to its implications on the VAT for fuel, which was increased to 16%. Authorities are however exploring the possibility of introducing a Tax Amendment Bill following the bromance between the opposition and the government to improve the flexibility of financing measures.”

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