Rising commodity prices and stagnant incomes eroded Kenyans purchasing power by 1.5 percent in the third quarter of 2023, according to a Consumer Spending Index released on Tuesday.
The ICEA report shows that semi and unskilled manual workers were hardest hit, recording the highest decline in expenditure.
While all categories (executive, skilled and unskilled workers) witnessed reduced spending levels in the third quarter of 2023, the lower income consumer segment had the largest proportion (9 percent) experiencing reduced personal consumption expenditure in that period.
From the report 37 percent of Kenyans indicated that their income did not change between 2022 and 2023, while 38 percent experienced a decline in income and 24 percent saw their income rise between 2022 and 2023.
The report by ICEA shows that individual spending sub-index fell by 3 percent between July and September 2023, while the retail business sales sub- index remained broadly flat in the same period.
“This resulted in a decline of 1.5percent in the overall consumer spending index (which is weighted 50percent by changes in individual spending and 50percent by changes in retail business sales),” said Head of Research at ICEA LION Asset Management Judd Murigi
She said this was a relatively resilient level of consumer spend in the third quarter considering the perception 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," said Murigi.
The official said the spending came in spite of continued slowed private sector credit.
The large business segment had the largest improvement (25 percent) in sales trends in the third quarter, followed by the micro businesses segment at 7 percent better sales trends.
The medium sized businesses segment recorded a fall of 18 percent in sales trends in the same period, while the small business segment had similar level of sales trends in the third quarter.
Various business sectors including retail stores, clothing & apparel, food and drink outlets, as well as house fittings & accessories recorded broadly similar trends in sales between July and September 2023, with no major divergence noted.
“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 with their spending trends,” added Murigi.
On the business side, that 48percent of businesses appeared to hold positive sentiments regarding sales trends while 45percent had negative sentiments regarding sales.
The index tracks consumer spending in order to gauge how the real economy is trending. It is based on interviews of 500 consumers and 100 retail businesses in the greater Nairobi area.