Kenya’s inflation slows to 5.8% in August as food costs slide

By bne IntelliNews September 1, 2015

A further slowdown in food costs growth cut Kenya’s headline annual inflation to a six-month low of 5.84% in August from 6.62% in July, data from the Kenya National Bureau of Statistics (KNBS) showed. Thus, it remained within the government's medium-term target of 5% plus/minus 2.5pp for the 12th month in a row after a temporary breach last summer.

The prices of food and non-alcoholic beverages, which are the main inflation driver with a 36.04% weight in the CPI basket, rose 9.9% y/y, decelerating from a 12.1% y/y growth in July.

On the other hand, the prices of housing, water, electricity, gas and other fuels, which are the second biggest heavyweight with an 18.3% share in the basket, grew 2.7% y/y, speeding from a 2.2% y/y growth in July.

Transport costs, which have the third largest weight of 8.66%, fell 1.8% y/y, softening from a 2.5% y/y drop in July.

Kenya’s monthly headline inflation rate quickened to 0.21% in August from 0.07% the month before, as food prices eased 0.256% (-0.6% in July), the cost of housing, water, electricity, gas and other fuels grew 0.76% (+0.76% in July), and transport costs rose 1.42% (+0.93% in July).

On August 5, Kenya’s central bank maintained the benchmark interest rate at 11.5% after hiking it by a total of 300bp in June and July amid heightened inflationary pressures due to a sharp depreciation of its shilling currency and rising fuel prices.

y/y inflation rate Aug-15 Jul-15 Aug-14 weight
All items 5.84% 6.62% 8.36%        100   
Food and non-alcoholic beverages 9.93% 12.14% 10.85% 36.04
Alcoholic beverages, tobacco and narcotics 3.25% 3.12% 4.44% 2.06
Clothing and footwear 4.76% 4.91% 4.95% 7.43
Housing, water, electricity, gas and other fuels 2.66% 2.21% 6.98% 18.3
Furnishings, household equipment and routine household maintenance 4.10% 4.08% 5.44% 6.16
Health 4.96% 5.00% 6.37% 3.13
Transport -1.79% -2.46% 11.68% 8.66
Communication 1.20% 1.19% 0.67% 3.82
Recreation and culture 3.01% 3.36% 12.73% 2.25
Education 3.94% 3.86% 5.44% 3.14
Restaurant and hotels 5.03% 5.30% 6.86% 4.48
Miscellaneous goods and services 5.08% 5.26% 4.45% 4.52
Source: Kenya National Bureau of Statistics        

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