August inflation likely to rise to 5.1 per cent – Cytonn

This is on increase in fuel prices

In Summary

•Petrol and diesel prices increased by 3.3 per cent and 3.0 per cent respectively.

•Pressure expected in the housing, water, electricity, gas and other fuels index.

A customer picks tomatoes on a shelf in Carrefour Supermarket/ENOS TECHE
A customer picks tomatoes on a shelf in Carrefour Supermarket/ENOS TECHE

The cost of living is projected to marginally increase this month despite favourable food prices which have relieved households during the Covid-19 pandemic.

Year-on-year inflation rate for August is projected to increase marginally to between 4.8 per cent and 5.1 per cent, researchers at investment firm-Cytonn have indicated.

This is up from 4.36 per cent last month when it fell to the lowest since November last year. The measure of the cost of living was recorded at 4.59 per cent in June.

According to Cytonn, the gains from the stable food prices are watered down by the increasing fuel prices.

Petrol and diesel prices have increased by 3.3 per cent and 3.0 per cent, respectively.

In the pump prices announced by the Energy and Petroleum Regulatory Authority (EPRA) mid this month, a litre of super petrol and diesel rose by Sh3.47 and Sh2.76 respectively.

The two commodities are key in the transport, manufacturing and large scale agricultural sector.

The price of kerosene, used by poor households for cooking and lighting, rose by Sh18.20. The new prices remain in force until September 14.

In Nairobi, motorists are paying Sh103.95 and Sh94.63 for a litre of Super petrol and diesel respectively, and Sh83.65 for kerosene.

The increase in pump prices is likely to have upward pressure on the transport index which holds a weighting of 8.7 per cent, the Cytonn researchers have noted.

“We expect the increased fuel prices to not only affect the transport index but also have a trickle-down effect on the prices of other commodity basket food prices due to higher transport costs,” Cytonn Investments says in its weekly market report.

The firm has also indicated pressure will be experienced in the housing, water, electricity, gas, and other fuels index given the 27.8 per cent increase in the price of kerosene.

Food prices have remained relatively stable during the month given the favorable weather and an improvement in agricultural output.

Last month, the Consumer Price Index (CPI) which measures the percentage change in the price of a basket of goods and services consumed by households, however increased by 0.08 per cent from 108.27 in June to 108.35 In July.

Whereas the year-on-year food inflation increased by 6.62 per cent, food and non-alcoholic drinks index decreased by 0.80 per cent in July, compared to June. 

"This resulted from decreases in prices of several food items outweighing the increases," the Kenya National Bureau of Statistics (KNBS) reported.

Prices of tomatoes, irish potatoes, spinach, onions and kale, registered decreases by 5.50, 4.09,3.24,3.06 and 2.62 per cent respectively in July compared to June prices.

A kilo of sukuma wiki, consumed widely by many households, retailed at Sh51.84 in July from Sh53.23.

On the other hand, the cost of electricity and kerosene went up by 0.5 per cent and 4.11 per cent respectively.

The transport index increased by 4.01 per cent mainly due to increased pump prices of diesel and petrol by 22.32 per cent and 12.21 per cent , respectively.