- Kenya's purchasing power drops 1.5% in 2023 amid rising commodity prices and stagnant incomes.
- Semi- and unskilled manual workers hit hardest with the greatest fall in spending, according to ICEA report.
- Despite income reductions, consumer spending remains relatively resilient, driven by increased costs of purchased items.
Kenyans spend more despite stagnant and declining incomes
The purchasing power of Kenyans has seen a significant decline owing to some economic challenges. In the past year, citizens of the East African country have been faced with rising commodity prices, while their incomes stagnated. As a result, Kenyans could scarcely purchase goods the same way they may have been accustomed to.
Kenyan shilling notes
A report by the Consumer Spending Index released on Tuesday, as seen in the Kenyan news publication, The Star, states that Kenya’s purchasing power was reduced by 1.5%, while income remained the same or declined from 2022 to 2023. According to the ICEA report, semi- and unskilled manual workers suffered the worst, with the greatest fall in spending.
Although all levels of earners including; executive, skilled, and unskilled workers, had reduced spending in Q3 of 2023, the lower-income consumers had the highest share (9%) of reduced personal consumption expenditure in the period under review.
During the period 37% of Kenyans had maintained the same level of income, 38% saw a decline and 24% had an increase in revenue.
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The ICEA data reveals that the individual expenditure sub-index declined by 3% between July and September 2023, while the retail business sales sub-index remained roughly stable over the same time.
“This resulted in a decline of 1.5 percent in the overall consumer spending index (which is weighted 50 percent by changes in individual spending and 50 percent by changes in retail business sales),” Head of Research at ICEA LION Asset Management Judd Murigi, stated.
She also noted that the relatively resilient level of consumer spending in Q3 of 2023 took into account the fact that disposable incomes had reduced.
"However, we note that many consumers attributed the additional spending to an increase in the cost of items purchased rather than higher income per se," the head of research disclosed.
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Nonetheless, expenditure continued despite the continuous slowing of private-sector lending.
In the third quarter, the big company category had the greatest improvement in sales trends (25 percent), followed by the microbusiness segment, which saw a 7 percent increase in sales.
The medium-sized businesses experienced an 18% drop in sales trends over the same time, while the small business segment saw a similar level of sales trends in Q3.
“Our sentiment analysis on individual spending trends indicated that 44 percent of consumers had a positive mindset regarding their spending while 56 percent had a negative mindset regarding their spending trends,” said Murigi.
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