Gas, cooking oil, soap prices hit home budgets, March inflation

Economy

Gas, cooking oil, soap prices hit home budgets, March inflation


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An attendant arranges gas cylinders at a Nyeri petrol station on May 22, 2013. FILE PHOTO | NMG

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Summary

  • This has forced many households, especially in the low-income segment, to reduce their shopping basket in an environment where firms have frozen salaries as they recover from Covid-19 economic hardships.
  • The rise in the cost of essential commodities could force workers to cut back on non-essential items like beer and airtime, ultimately hurting firms like EABl and Safaricom.
  • Cooking gas has recorded the biggest jump in price among the essential items over the past year among items captured in the inflation report, pushing families to charcoal for cooking.

The prices of essential items, including soap, cooking gas and cooking oil, have risen by up to a third in the past 12 months, straining household budgets at a time when average private-sector pay is growing at the slowest pace in a decade.

Kenya National Bureau of Statistics (KNBS) data show that inflation rose from 5.08 percent in February to 5.6 percent in March on the back of a sharp increase in the prices of key household items like cooking gas, food and petrol.

This has forced many households, especially in the low-income segment, to reduce their shopping basket in an environment where firms have frozen salaries as they recover from Covid-19 economic hardships.

The rise in the cost of essential commodities could force workers to cut back on non-essential items like beer and airtime, ultimately hurting firms like EABl #ticker: EABL and Safaricom #ticker: SCOM.

Cooking gas has recorded the biggest jump in price among the essential items over the past year among items captured in the inflation report, pushing families to charcoal for cooking.

KNBS data show the price of the 13-kilogram cooking increased 38 percent over the past year to an average of Sh2,866 in March, followed by cooking oil (35.15 percent), bar soap (20.88 percent), sukuma wiki (20.18 percent) and wheat flour (17.68 percent).

“Prices of food items in March 2022 were relatively higher compared to prices in March 2021,” KNBS said on Thursday.

The rise in the cost of basic commodities emerges in a period when workers’ pay is yet to recover from the effects of Covid-19, which triggered layoffs and pay cuts. The average earnings for workers in the private sector grew at the slowest pace in a decade in 2020 as pandemic-hit firms moved to slash salaries and adopt unpaid leave policies to contain costs.

Companies raised average monthly pay by 3.82 percent to Sh67,490 in the year ended June 2020, a steep drop from the 8.16 percent raise to Sh65,006 the year before.

KNBS is yet to release the 2021 data, but employers say it will take years for pay raises to return to pre-Covid levels, with firms struggling with elevated costs largely due to uncertainties related to the pandemic.

Costly crude oil in the wake of the Russian invasion of Ukraine, the imposition of 16 percent value-added tax (VAT) and the search for higher margins by the dealers have combined to send cooking gas prices to their highest level in Kenya’s history.

Kenya relies on wheat imports from Ukraine and Russia and the conflict in the two countries pushed wheat flour prices to a record high, setting the stage for costly bread, cake and chapati.

KNBS says wheat flour prices have jumped 17.68 percent to average Sh151.43 a packet.

The Russia- Ukraine conflict has constrained the supply of major fuel and food items like palm oil.

A liter of cooking oil retailed at an average of Sh332.37 compared to Sh245.92 in March 2021 on the back of a jump in palm oil prices, the main raw material for the product.

The price of a bar of laundry soap, which also has palm oil or other vegetable oils as an ingredient, went up by 20.9 percent in the period to retail at an average of Sh144.92 for an 800-gram bar.

The cost of 500 grammes of detergent has also risen significantly, by 12 percent to Sh184.60.

Prices of goods can, however, vary from the KNBS average due to different factors such as cost of last-mile transportation and retailer markups for those sellers who are unable to source directly from manufacturers or large wholesalers.

The prices surge has, however, been driven mainly by global geopolitical and supply chain concerns, exposing Kenya’s soft underbelly as a net importer of essential raw materials required for the manufacture of basic household items.

Cooking oil manufacturers were paying up to $ 1,946 (Sh223,693) for a tonne of palm oil at the beginning of March, up from $ 1,490 (Sh171,276) before the Ukraine conflict began in mid-February.

The price of the commodity has also nearly tripled from $ 700 (Sh80,465) per tonne before the onset of the pandemic in March 2020, which caused supply constraints that persist to date.

The Russia-Ukraine conflict, which curtailed global sunflower oil supply, has led to a spike in palm oil demand. The two oils are the most commonly used in the global market.

It has also led to higher wheat prices, resulting in a 17.7 percent jump in wheat flour prices on shop shelves to Sh151.43 for a two-kilogram packet.

Kenyans have also been paying more for vegetables due to the seasonal price inflation in the dry season, which pushed the cost of collard greens (sukuma wiki) higher by 20.2 percent, spinach by 19.7 percent and Irish potatoes by 15.3 percent.

Milk prices have gone up on a supply shortage due to the dry spell, making breakfast costlier.

Sukuma wiki, milk and spinach prices are, however, likely to stabilize in the short term due to the onset of long rains in many parts of the country, including Nairobi.

There has been some relief on household budgets due to lower electricity prices following the tariff review effected at the end of January, which resulted in power bills coming down by 11.13 percent in the year to March 2021.

The government is planning another review to cut electricity prices by 15 percent before the end of June.

The 15 percent cut implemented in January saw the cost of buying 200 units of electricity drop from Sh5,185 in December to Sh4,373 in February.

The Ministry of Energy said on Tuesday that it had opted for talks over forcing the independent power producers (IPPs) to lower tariffs in the wake of opposition from the foreign firms to the planned review.

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