Consumer sentiment in sharp rise, says survey

Customers at a Nakumatt branch in Nairobi. Kenya’s household consumption levels have risen. PHOTO | FILE 

In Summary

• Nielsen Consumer Confidence Index (CCI) covering the third quarter of 2016 shows that 53 per cent of respondents plan to keep spending on consumer goods, home improvement and investment in stocks.

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

A majority of Kenyans say they are willing to spend their available cash on immediate needs, which has helped fuel a boom in household consumption levels.
The latest Nielsen Consumer Confidence Index (CCI) covering the third quarter of 2016 shows that 53 per cent of respondents plan to keep spending on consumer goods, home improvement and investment in stocks.

This is a 21 percentage point increase quarter-on-quarter.

Consumer spending driven by a growing middle class has boosted the retail sector in Kenya, leading to the development of shopping malls across major urban centres.

Nielsen’s mobile-based CCI survey shows that the rise in willingness to spend is in spite of a minority, 37 per cent, saying that they had spare cash and the job prospect sentiment decreasing by five percentage points from the second quarter to 56 per cent.

“The backdrop to this positive sentiment is the resilience of the Kenyan economy, in particular the shilling, which despite its recent depreciation, remains solid as compared to other emerging market currencies. This is due to the country’s stringent monetary tightening and its low level of dependence on hydrocarbons (oil) and minerals exports,” said Nielsen East and West Africa managing director Abhik Gupta.

“As consumers increasingly express favourable sentiment for the country and their own outlook, there are opportunities for manufacturers and service providers to tap into this increased intention to spend.”

The Nielsen findings on Kenyan consumption habits tally with research done by Stratlink Africa, as shown in their November Africa markets update, which indicated that Kenya’s consumption-to-GDP ratio has raced ahead of the sub-Saharan Africa average.

Stratlink and World Bank data shows that Kenya’s household consumption to GDP ratio by the beginning of last year stood at 77 per cent compared to the sub-Sahara Africa average of 68 per cent.

Kenya’s ratio has been widening against the regional average since 1996, when it was measured at 70 per cent.

“The Kenyan market continues to attract foreign investors targeting fast growing consumption. Over the last five years, the Kenyan market has attracted a number of multinationals (especially in the fast-food segment). This backs our long-held view that accelerating consumption is bound to be one of Kenya’s key growth engines of the next five years,” said Stratlink in its November markets update.

In the Nielsen CCI, the improvement of Kenya’s spending sentiment in quarter three has pushed the country above the other African economies surveyed using the mobile based method—Nigeria and Ghana.

Kenya now has the highest consumer confidence score among the three at 120, representing a rise of six points quarter-on-quarter.

Nigeria’s score of 113 represented a drop of nine points from the second quarter, which was the lowest score for the country in the three-year history of the Nielsen mobile survey, while Ghana score rose by five points to 109.