Food inflation down but Covid keeps prices high

Food inflation was lower by a percentage point in May than the previous month as favourable weather reduced the cost of some food items. However, supply chain disruptions meant that Kenyans were unable to benefit fully from the improved production.

Official numbers show the cost of food items in the inflation basket went up by 10.6 per cent last month, compared to 11.6 per cent in March and April, and a high of 14.8 percent in February.

The growth in food prices, however, remains high relative to that of other items on the inflation basket, where food carries the highest weight of 32.9 percent.

Overall inflation last month stood at 5.47 percent, compared to 5.62 percent in April.

“Despite the favourable weather conditions the prices of some food items remained elevated because of the supply disruptions arising from the Covid-19 containment measures,” Central Bank of Kenya said in its latest weekly bulletin.

Data from the Kenya National Bureau of Statistics (KNBS) on inflation for May showed that onions, tomatoes and beans recorded the biggest price increase per kilogramme year-on-year, while potatoes, carrots and spinach had the biggest drop.

The price of a kilo of onions rose by 21.8 percent last month compared to May 2019, tomatoes went up by 15.9 per cent while a kilo of beans was 10.9 per cent costlier.

On the other hand, carrots saw a price drop of 22.5 percent, spinach by 16.8 percent and Irish potatoes by 10.5 percent year-on-year.

The sharp rise in food inflation in recent months has, however, contrasted with that of the other categories of measuring the cost of living.

Last month, fuel inflation stood at three per cent, while non-food-non-fuel (core) inflation was 1.8 per cent, respectively reflecting low global crude prices and muted demand-side pressure in an economy where purchasing power has been eroded by the income losses associated with the Covid-19 disruption.

As a result, private sector players, banks and analysts expect Kenya’s inflation to remain within the preferred CBK target of five percent plus or minus 2.5 percentage points for the rest of the year.

Respondents polled in CBK’s market perceptions survey of March expect inflation at between 6.0 and 6.3 percent this year.

Banks and microfinance banking institutions projected 6.1 percent in the next year, while non-bank firms see it at 6.3 percent.