• A good or a service that would cost Kenyans Sh1,000 in September last year, they will have to add Sh420 more to get the same currently.
• A new spending index by ICEA, shows that Kenyans spending increased by 6 percent between January and March 2024.
Image: JACKTONE LAWI
Despite the easing inflation in the first three months of 2024, Kenyans spending still went up by six percent compared to the three months to December 2023.
A new spending index by ICEA LION Group shows that in the quarter between January and March the rise was however slower compared to the last quarter of 2023.
In the period between October and December 2023 the spending index had risen by 36 percent.
This implies that in the last six months’ alone expenditure cost has increased by 42 percent further squeezing Kenyans more.
This essentially means that a good or a service that would cost Kenyans Sh1, 000 in September last year costs Sh420 more in the first three months of 2024.
“The bulk of the spending by individuals goes to food and shelter and less than 10 percent goes to entertainment and leisure activities,” said ICEA LION head of research Judd Murigi.
ICEA however, notes that the ILAM Consumer Spending Index rose by 18 percent to 116 in the final quarter of 2023, showing that consumers spent more money on goods and services in the period.
The figure fell by five percent to 110 in the first three months of 2024 showing that despite a rise in expenditure Kenyans are trying to cut on what they buy with their money.
Murigi pointed out that there was a significant improvement noted in individual spending trends in fourth quarter of 2023 compared quarter one of 2024.
Women and consumers aged between 18 and 35 years mainly drove this. The report attributes the rise in spending largely to higher cost of items purchased.
“Approximately three quarter (75 percent) of Kenyans attributed their increased spending to rising prices of goods, whereas 25 percent indicated that they spent more due to purchasing additional goods,” added Murigi.
In the period 50 percent of the Kenyan consumers indicated that their income levels did not increase over the last year, while 25 percent reported increased income and reduced income respectively.
This was an improvement from 2023 when almost 40 percent of respondents reported a decline in income over the previous 12 months.
In terms of socio-economic categories, the lower income segment recorded the strongest improvement in spending trends
According to the findings about 67 percent respondents have allocated a minimum of 31 percent of their income towards food and shelter expenses over the past three months.
Additionally, approximately 51 percent of them have allocated less than 10 percent of their income to leisure and entertainment activities.
Approximately 53 percent of Kenyans polled allocated less than 10 percent of their income to travel and leisure expenditures.
Despite the push for a saving culture in the country, 46 percent of respondents allocated less than 10 percent of their income towards savings with about 9 percent reporting no allocation for savings
Among those reporting decreased spending, 57 percent cited lower prices of goods as the reason, while 43 percent attributed it to purchasing fewer quantities of goods.
The report however faulted the high cost of credit in the country for reducing uptake of loans in the country.
It revealed that only 12 percent of Kenyans expenditure was in credit compared to a massive 88 percent of who made purchases using their own income.
Among those who use credit options, mobile loan and local shop arrangements emerged as the most preferred mode accounting at 35 percent and 22 percent respectively.
"Individual spending trends exhibited positive trends while retail business sales came under pressure in the first quarter of 2024" said ICEA LION Asset Management CEO Einstein Kihanda.
Among the businesses polled approximately 56 percent experienced a decline in sales, with the majority of them reporting a decrease ranging from one percent to 20 percent.
On the other hand, for the 44 percent of businesses that saw an increase in sales, the majority reported an increase ranging from 6 percent to 20 percent.
Retail business sales trends improved by six percent the final quarter of 2023 but declined by 15 percent in the first quarter of 2024.
The rise between October and December was majorly driven by higher customer traffic and higher individual customer spend, while the decline in January to March was especially in the clothing retail and food & beverage outlets.