Business

Cost of living hits new 5-year high as inflation breaks target at 7.9pc

Friday, July 1st, 2022 09:00 | By

More pain faces households as inflation hit a five-year high of 7.9 per cent in June, breaching the upper limit of 7.5 per cent set by the Central Bank of Kenya (CBK) aimed at keeping inflation at bay. 

The rise in the cost of living from 7.1 per cent in May signals the government’s continued inability to keep the inflation within its preferred target despite its numerous subsidy programmes.

New data from the Kenya National Bureau of Statistics (KNBS) mirrors the outcome of higher food and fuel prices over recent months which has left Kenyans with sticker-price shocks as they purchase essential goods.
The last time inflation surpassed the target was in August 2017, when it stood at 8.04 per cent. In June, food prices led to the cost surge as items in the category posted a mean increase of 13.8 per cent in costs year-over-year.

Others were furnishings, household equipment and routine household maintenance (9.2 per cent), transport (7.1 per cent) and housing, water, electricity, gas and other fuel (6.8 per cent), KNBS said in June’s monthly inflation report. 

Over the last month, wheat flour posted the sharpest increase in prices, at 12.7 percent to Sh186.9 per 2 kilogram packet compared to Sh165.89 witnessed in May. 

Maize flour was not included in the basket of household goods sampled over the period, but had hit Sh147.5 per 2kg in May compared to over Sh200 current retail prices in most shops. The price of one-litre cooking oil increased to Sh387, about a 4.7 per cent surge from the previous Sh370. 

Knock-on effect

On the back of an increase in prices for all the three types of fuel, which soared by Sh9 in May, there was a knock-on effect on the cost of transportation. The Transport Index increased by 0.9 per cent during the review period. 

There was, however, relief as prices of groceries cooled off marginally. Prices of onions-leeks and build and potatoes (Irish) dropped by 5.3 per cent and 4.8 per cent, respectively.

The increase in the cost of living is set to deliver pain to the low-income earners, especially in Nairobi, compared to the middle and upper-class population, indicating that households will have to cut spending on other products.

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