ICEA LION’s ILAM Consumer Spending Index Shows Retail Resurgence Despite Decline In Individual Spending

In a climate where economic uncertainty and fluctuating incomes dominate the conversation, ICEA LION Asset Management’s release of the Third Quarter 2024 ILAM Consumer Spending Index offers refreshing insights into the delicate dance between consumer spending habits and retail sales trends across East Africa.

Titled “Recovery in retail business sales trends offsets a drop in individual spending,” the report paints a picture of resilience in retail even as personal spending shows some signs of strain.

Consumer Income Trends – Peaks and Plateaus

One of the report’s most insightful revelations centers around income stability and growth—or lack thereof. Of the approximately 1,200 surveyed consumers, nearly half reported no change in their income over the past year. Still, a remarkable 20% managed to achieve higher earnings, a feat largely attributed to those employed in manufacturing and trade.

For the second quarter in a row, manufacturing sector workers led the pack in income gains, underscoring the strength of this sector amid broader economic shifts. Conversely, individuals working in wholesale and retail industries reported the most significant income reductions, signaling a bifurcation in economic resilience based on industry.

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ILAM Consumer Spending Index Soars by 30% in 3Q24

ICEA LION’s Consumer Spending Index surged by 30% this quarter—a figure bolstered largely by improved sales among retail businesses that managed to counterbalance the dip in individual spending. This uptick in retail sales is not only a testament to the adaptability of the sector but also reflects a recovering consumer base that’s learning to navigate tightened financial situations while still investing in essential goods and services.

A Retail Turnaround Anchored in Key Urban Centers

A key finding from the report shows that, unlike in the previous quarter, 60% of retail businesses saw sales improvements this time around. The cities of Nairobi and Mombasa took the lead in this retail resurgence, while businesses in Kisumu and Nakuru saw lower sales—a trend hinting at geographic disparities in consumer behavior and spending power.

The retail shopping and food & beverage sectors were the clear winners this quarter, benefiting from renewed interest and spending in these spaces. This robust performance in the retail sector suggests that consumers are shifting their focus, perhaps prioritizing essentials and accessible luxuries, even as individual spending wanes.

Individual Spending Declines, with Women Leading the Contraction

However, the story isn’t all about growth. ICEA LION’s report unveils a dip in individual spending, down by 3% from the previous quarter. Interestingly, women’s spending dropped for the first time this year, highlighting a shift in the purchasing priorities of a demographic that has historically driven consumer markets.

Age-wise, the 36–45 cohort emerged as the most enthusiastic spenders, but this trend was counteracted by a decrease in spending among those aged 18–35—a potential indicator of changing economic outlooks or financial pressures facing younger adults.

A Responsible Spending Landscape

Another intriguing facet of the index reveals that 90% of consumers surveyed relied on their own income for purchases, with only a minority turning to credit. This finding points toward a relatively cautious and credit-averse spending environment, indicating consumers’ keen awareness of the financial pressures they face. In a high-interest rate climate, this approach may be the most financially sound choice, but it also points to a constrained consumer base that could impact future retail sales if income levels don’t improve across the board.

Reflections and Forecasts

ICEA LION’s CEO Einstein Kihanda, who also recently chaired the Institute of Certified Investment and Financial Analysts, encapsulated the report’s findings with an optimistic note: “Retail businesses surprisingly reported improved sales trends despite the prevailing operating environments.” His remark underscores the resiliency and ingenuity of retailers in adapting to challenging economic circumstances and underscores the cautious optimism that characterizes East Africa’s economic landscape.

Final Thoughts

ICEA LION Asset Management’s third-quarter index serves as a barometer for the evolving consumer landscape, where retail businesses are defying the odds with stronger-than-expected sales despite drops in individual spending. In this fluctuating environment, retailers and policymakers alike are presented with a unique opportunity: to focus on bolstering sectors that are currently thriving, like manufacturing, while devising supportive strategies to alleviate pressures in other areas. As East Africa’s consumers continue to tread carefully, the region’s retailers are, for now, managing to stay resilient—a promising sign in an ever-changing economy.

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