Nairobi’s rich biggest gainers as inflation hits 19-month low on falling energy bills

Politics and policy

An attendant fuels a car at a Nyeri petrol station on January 16 where prices were Sh94.4 for petrol and Sh84.9 for diesel. PHOTO | JOSEPH KANYI 

By NEVILLE OTUKI, notuki@ke.nationmedia.com

In Summary

• Inflation for city’s upper income households stood at 2.05 per cent last month down from 3.19 per cent in December and 9.58 per cent last August, according to data released by the Kenya National Bureau of Statistics (KNBS) on Friday.
• At 2.05 per cent, Nairobi’s wealthy have seen their inflation drop by 7.53 percentage points since August, compared with 3.17 percentage points and 2.66 for the middle and lower income segments respectively.

Inflation eased to a 19-month low on Nairobi’s rich families in January, making them the biggest beneficiaries of fuel and electricity whose prices have been falling in the last five months.

Data released by the Kenya National Bureau of Statistics (KNBS) on Friday shows that the inflation for city’s upper income households stood at 2.05 per cent last month down from 3.19 per cent in December and 9.58 per cent last August.

At 2.05 per cent, the cost of living measure is the lowest since June 2013 when it stood at 1.68 per cent.

This is the fifth monthly drop in inflation for Nairobi’s rich families which helped cut the overall inflation to 5.53 per cent in January down from 6.02 per cent the previous month helped by lower prices of fuel, electricity and key food items.

But KNBS data shows despite deep cuts in fuel prices, matatu and bus fares went up last month compared to a similar period last year — showing private motorists are the ones enjoying lower petroleum prices.

Fares for a 350km ride in a matatu went up 10.4 per cent to Sh403.45 last month compared to a similar period last year while that of a 350km country bus journey increased by 6.8 per cent to Sh964.01.

“This is a concern for us,” said James Gatungu, director of production statistics at KNBS.

At 2.05 per cent, Nairobi’s wealthy have seen their inflation drop by 7.53 percentage points since August, compared with 3.17 percentage points and 2.66 for the middle and lower income segments respectively.

READ: Nairobi's rich gain most from falling December inflation

KNBS attributed the contrast in the inflation levels among income segments to different consumption patterns, adding that the rich spend most of their income on utilities and transport while the poor use nearly half of their income on food.

Nairobi’s middle class spends on average of 22 per cent of their income on food, the wealthy use seven per cent while poor households spend 42.5 per cent.

But the city’s wealthy on average spend the largest portion of their income on transport at 27.9 per cent, explaining their exposure to rising motoring expenses.

Nairobi’s lower income segment saw its inflation ease marginally to 4.83 per cent down from 4.87 per cent in December and 7.49 per cent five months ago.

The middle-class homes’ eased to 3.22 per cent last month from 3.61 per cent in December and 6.39 per cent last August.

While food prices have dropped since August, electricity and fuel prices have fallen by a bigger margin, offering relief to the top earners.