Middle class feels pinch of rising cost of living

Cost of electricity, cooking gas prices and rising rent were the major drivers. PHOTO | FILE 

By NEVILLE OTUKI, notuki@ke.nationmedia.com

In Summary

• Inflation for the middle class rose to 4.87 per cent last month from 4.84 per cent in September
• This is the highest inflation level since August 2014 when it stood at 6.39 per cent.
• Overall, Kenya’s inflation rose to 6.72 per cent in October from 5.97 per cent the previous month driven by rising food and utility prices.

Nairobi’s middle class recorded a 14-month high inflation in October driven by higher power bills, cooking gas prices and rising rent.

Kenya National Bureau of Statistics (KNBS) shows that inflation for the middle class rose to 4.87 per cent last month from 4.84 per cent in September, marking the highest rate since August 2014 when it stood at 6.39 per cent.

The differences in inflation levels among Nairobi’s income segments is linked to their different consumption habits, with the rich spending most of their income on transport, middle class on utilities and rent while food takes the bulk of the poor’s budget.

Inflation for city’s upper income homes hit 11-month high in October at 3.5 per cent while the poor’s was at 7.23 per cent, or a three-month high, indicating the middle class were most affected.

Overall, Kenya’s inflation rose to 6.72 per cent in October from 5.97 per cent the previous month driven by rising food and utility prices.

The KNBS data shows that electricity consumers using 200 units (kilowatt hours) per month, largely middle income homes, on average paid Sh3,672 in October up from Sh3,484 the previous month. Cooking gas prices were up Sh8 to Sh2,401 for a 13-kilo cylinder.

Middle class homes spend the bulk of their monthly income (23.6 per cent) on housing, utilities and cooking gas, exposing them most to the rising costs.

Official data shows that two-bedroom flats, preferred by middle class homes, have experienced the fastest rise in rent over the past five years.

The KNBS data the average rent of a two-bedroom flat at Sh19,939 per month in October up from Sh13,493 in 2010, reflecting a growth of 47.7 per cent.

READ: Two-bedroom flats tenants feel rent rise pinch

This growth is higher than that of a three-bedroom maisonette, preferred by rich homes, whose monthly rent are up 22.8 per cent to Sh32,605.

Sector players have attributed the jump in two-bedroom rental prices to rising demand among working middle-income households for the units whose location have proved convenient in daily commute.

Rent and utilities take up 19.8 per cent of the rich’s monthly income and 18.2 per cent for poor homes.

Nairobi’s middle class on average spend 12.4 per cent of their income on transport and 22 per cent on food which takes up the bulk of the poor’s income at 42.5 per cent, exposing them to food inflation.

The KNBS defines low-income earners as those spending less than Sh23,670 monthly, middle class (between Sh23,671 and Sh120,000) and upper income past Sh120,000.