LOW SPEND

No merry Christmas as families cut budget on low earnings

Spending on travel is meanwhile expected to dip with 40 per cent of the survey’s respondents expressing fear of travel on perceived risks of contracting Covid-19.

In Summary
  • A whopping 84 percent are planning a low budget compared to 55 per cent last year
  • Only two per cent likely to spend between Sh100,000 to Sh500,000 compared to 14 per cent last year. 
Children ride on a makeshift funfair train at the Uhuru Park grounds during Christmas Day celebrations in Nairobi, Kenya December 25, 2019.
Children ride on a makeshift funfair train at the Uhuru Park grounds during Christmas Day celebrations in Nairobi, Kenya December 25, 2019.
Image: REUTERS

Coronavirus's economic shock has squeezed the Christmas budget for most families in Kenya, with the majority likely to spend as little as Sh5,000 compared to last year. 

The Kenya 2020 December Holiday Retail Survey by Viffa Consult which assessed spending sentiments among Kenyans ahead of Christmas festivities established that the majority are willing to spend between Sh5,000 and Sh30,000.

According to the survey, 84 percent are planning a low budget Christmas compared to 55 per cent last year.

 
 

There is a significant drop in projected spending between Sh31,000 and Sh500,000 which fell by a combined 32 per cent to a mere seven per cent from 35 per cent in 2019.

Only two per cent are likely to spend between Sh100,000 to Sh500,000 compared to 14 per cent last year. 

The reduction in planned spending comes as Kenyans register reduced gross monthly earnings that have hit hard the burgeoning middle class known for high spending during holidays. 

For instance, there is a 22 per cent drop in salaries for individuals earning between Sh50,000 and Sh500,000 as companies affected payouts as a coping mechanism during the pandemic season. 

However, there was a 21 per cent increase in the number of those earning below Sh50,000 while those earning above Sh500,000 increased by one per cent, indicating a growing class of richer individuals despite tough economic times. 

''The ripple effect of a struggling economy despite government intervention through PAYE and VAT relief is a net reduction in disposable income leading to budget cuts at the household level,” says the survey. 

Food and beverage purchases top the list of the desired spending in the holiday season ahead of clothes, toiletries, personal effects and electronics, despite rising prices. 

 
 
 

According to KNBS, the month-to-month food and non-alcoholic drinks inflation rose by 1.54 per cent, while the year-on-year food inflation stood at 6.09 per cent during the month.

“This was a net effect of an increase in prices of several food items which outweighed decreases in prices of others,” KNBS said in its monthly statement.

For instance, the price of a 500ml packet of milk went up to Sh49 from Sh48 last month.

The price of a kilo of tomatoes has risen to Sh86 from Sh85 in October while wheat flour price rose by a shilling to Sh119 for a two-kilogram packet.

Meat, considered a luxury in many Kenyan households, now costs Sh443 from Sh439 per kilo of beef, while a kilo of goat meat costs Sh529 up from Sh527.

The price of maize flour remained unchanged, at Sh50 for loose flour, while a 2kg packet of sifted flour now costs Sh2 less at Sh115. 

Even so, the looming maize and wheat shortage and rising import costs as a result of weakening shilling are likely to see the cost of ugali and chapati rise, further dimming chances to merry. 

The inflation rate, which measures the cost of living, hit a six-month high in November at 5.46 per cent on account of the increased food prices.

Spending on travel is meanwhile expected to dip with 40 per cent of the survey’s respondents expressing fear of travel on perceived risks of contracting Covid-19.

This is likely to further dampen earnings for the hospitality sector which has borne the brunt of the virus that locked foreign visitors. Retailers are also likely to feel the pinch on reduced spending power by households. 

“Retailers in Kenya have experienced business disruption due to depressed disposable income as well as through internal challenges for some retailers,” the survey said.