Inflation, after reaching a multi-year low of 3.2% year on year in October, is now rising again, and jumped to 3.8% in November, under pressure from food and fuel prices. Prices, on a month-on-month basis, jumped by 0.8% in November, the fastest rise for almost a year. Food prices, which have a 36% weighting in the new consumer price index (CPI; introduced in February 2010), are the main inflationary driver. They rose by 6.7% year on year (and 1.4% month on month) in November owing to global trends and erratic weather: beef, milk, rice and bread all posted significant increases. Although the food weighting has been reduced from 50% under the old CPI, to reflect shifts in household spending patterns, it is still the biggest component by a large margin. Transport prices (with an 8.7% weighting) are also climbing in line with fuel prices, and rose by 5% in November (and by 0.8% month on month).
Costlier fuel is also feeding through into housing and utility prices (with an 18.3% weighting), which rose by 2.6% in November, the fastest for five months. Higher fuel prices will continue to feed through the entire price system. The government is hoping that new fuel price caps will help, but the benefits could be temporary at best (if they deter investment). On the plus side, inflation is being held in check by the sharp fall in telecoms tariffs (down by 24.4% in November) following price wars in the sector as operators battle for market share. Inflation remains comfortably below the government's 5% target-and averaged about 3.9% in 2010-but is heading higher and is likely to breach the target in 2011, albeit by a small margin, depending on world markets and the local weather.
Inflation, 2010 | ||||||||
(% unless otherwise indicated) | ||||||||
CPI weighting | May | Jun | Jul | Aug | Sep | Oct | Nov | |
Overall inflation | ||||||||
Year on year | 3.9 | 3.5 | 3.6 | 3.2 | 3.2 | 3.2 | 3.8 | |
Month on month | 0.2 | -0.2 | 0.4 | 0.3 | 0.5 | 0.2 | 0.8 | |
Year-on-year inflation by category | ||||||||
Food & beverages | 36.0 | 4.4 | 4.4 | 4.6 | 5.5 | 5.7 | 5.6 | 6.7 |
Housing & utilities | 18.3 | 3.4 | 2.7 | 2.8 | 2.1 | 1.3 | 2.1 | 2.6 |
Transport | 8.7 | 6.0 | 4.3 | 3.9 | 4.8 | 4.9 | 5.0 | 5.5 |
Clothing | 7.4 | 3.4 | 2.9 | 2.8 | 3.5 | 3.5 | 3.4 | 3.4 |
Furniture & equipment | 6.2 | 3.0 | 3.5 | 3.7 | 3.9 | 3.7 | 3.8 | 3.6 |
Restaurants & hotels | 4.5 | 3.0 | 2.4 | 2.5 | 3.1 | 4.6 | 4.4 | 4.9 |
Communications | 3.8 | -0.2 | -0.8 | -0.3 | -24.1 | -24.6 | -24.9 | -24.4 |
Health | 3.1 | 4.2 | 3.8 | 3.5 | 3.8 | 4.6 | 3.9 | 3.8 |
Education | 3.1 | 1.4 | 1.4 | 1.6 | 1.6 | 1.7 | 1.7 | 1.8 |
Recreation & culture | 2.2 | 1.0 | 0.9 | 0.9 | 1.0 | 0.9 | 1.0 | 1.2 |
Alcohol & tobacco | 2.1 | 7.1 | 7.8 | 7.3 | 7.7 | 7.4 | 5.8 | 5.5 |
Miscellaneous | 4.5 | 2.2 | 1.7 | 1.3 | 2.0 | 1.7 | 1.5 | 2.0 |
Sources: Kenya National Bureau of Statistics; Central Bank of Kenya, Monthly Economic Reviews. |
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