Kenya: Inflation increases in May
Inflation ticked up to 5.1% in May, up from April’s 5.0% and surprising markets on the upside. Looking at the details of the release, the increase was broad-based, with prices for food and non-alcoholic beverages, housing and utilities, and clothing all rising at a faster clip. That said, transport price pressures eased.
Meanwhile, the trend pointed down slightly, with annual average inflation coming in at 6.5% in May (April: 6.7%).
Lastly, consumer prices increased 1.05% over the previous month in May, swinging from April’s 0.19% fall. May’s figure was the highest reading since April 2022.
Widespread flooding since mid-April has exerted upward pressure on prices, which have now exceeded the Central Bank’s target of 5.0%. Our Consensus is for inflation to average below 2023’s level this year but remain above target through end-2024.
Oxford Economics’ Shani Smit-Lengton commented:
“The heavy rains have damaged supply chains and storage facilities, which could trigger an increase in domestic food prices. Moreover, given that Kenya is within its primary planting season (mid-March to end-May), the excessive rainfall might result in seed loss and land damage. Consequently, Kenya may face a delayed harvesting season or reduced crop yields in H2 2024. On a positive note, […] global food prices are lower, and the Kenyan shilling remains relatively strong, suggesting that Kenya could import its national food requirements should a food shortage occur.”