Kenyan Inflation Rate at 17-Month Low as Food-Cost Growth Slows

NAIROBI (Capital Markets in Africa) – Kenyan inflation slowed to a 17-month low in October as food-price growth decelerated and demand was hamstrung by political uncertainty.

Consumer prices rose 5.7 percent from a year earlier, compared with 7.1 percent in September, the Kenya National Bureau of Statistics said Tuesday in an emailed statement from the capital, Nairobi. Costs decreased 0.6 percent in the month.

The economy of the world’s largest shipper of black tea has been hit by the worst drought in three decades that’s curbed output of corn, a staple, pushing up consumer prices. Inflation soared past the 7.5 percent upper limit of the Central Bank of Kenya’s target range in February for the first time in more than a year and economic growth slowed as farming output shrank.

A rerun of annulled presidential elections, which prolonged the vote period by more than two months to Oct. 26 and added the political uncertainty in the East African nation, may have cost the economy 700 billion shillings ($6.75 billion),according to the Kenya Private Sector Alliance, the main business lobby group. President Uhuru Kenyatta was declared the winner of the second ballot that was boycotted by the main opposition and said he expects his victory to be challenged in the nation’s top court.

Subdued Demand
Improving weather and agriculture output could support a stable inflation outlook even as food prices may pick up from December when Kenya’s so-called short rainfall season that starts in October comes to an end, said Stephanie Kimani, an economist at Commercial Bank of Africa.

“The stability will also be supported by subdued demand,” Kimani said by phone from Nairobi. “This is mostly due to constraints on private-sector credit and the general slowdown in the economy because of elections.”

Prices of food and non-alcoholic drinks, which make up more than a third of Kenya’s inflation basket, rose 8.5 percent in October, compared with 11.5 percent reported in September. Food costs decreased 1.8 percent in the month.

Source: Bloomberg Business News