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Kenya consumer confidence falls on inflation and credit squeeze

A survey by a global consultancy shows Kenya’s consumer confidence for 2017 dropped significantly towards the end of last year, eroded by concern over inflation, the credit crunch and unemployment.

An index by Nielsen Holdings, an international performance management company, shows buyer confidence slumped by 11 points in quarter four of last year compared to the previous quarter.

The firm, however, noted that this is still a positive result as it is above the 100-point level at 109 that indicates overall optimism within the consumer confidence ranking, despite the drought in the country which has resulted in rising food prices.

“Compared with some of the more volatile economies in Sub-Saharan Africa, the Kenyan economy is growing at a relatively strong and stable rate, with GDP growth of 6.2 per cent, and Kenyans are generally feeling positive about the future,” said Nielsen East and West Africa managing director Abhik Gupta.

“However, in the fourth quarter, growth and projections for 2017 slowed, fuelled by the implementation of capped interest rates, rising food inflation and unemployment concerns, particularly among the young. Nearly one in every five Kenyan youths of working age is unemployed.”

READ: Rising food and fuel prices lift inflation to four-year high

Headline inflation

Headline inflation has also shot up to 9.01 per cent, well above the preferred ceiling of 7.5 per cent.

The inflation is mainly driven by increase in the cost of food — due to drought — and fuel as crude prices recover in the international market.

According to the survey, Kenyans’ immediate-spending intentions declined most in the quarter, dropping 11 percentage points to 42 per cent of respondents even as the outlook for jobs declined for the second consecutive quarter, dropping four percentage points to 52 per cent.

In terms of what they would use their spare cash for, the highest number of Kenyans polled said they are seeking to bolster their financial future, with 85 per cent saying they would put it into savings.

Size of economy

In line with this, and despite the drop in its consumer confidence score, Kenya remains a top-ranked prospect in Africa based on the Nielsen Africa Prospects Indicator (APi), which integrates macroeconomic, business, retail and consumer factors. 

Within that overall APi ranking Kenya is first on the Macro Index, which factors in economic growth performance in relation to the size of the economy, and second on the business and consumer indices.

Overall, the World Bank forecasts Kenya’s 2016 GDP growth at 5.6 per cent, a robust performance against the 1.5 per cent average for SSA.

“Strong agricultural output, a resurge in tourism as well as increased FDI resulting in infrastructure projects has also created Kenya’s far more diversified economy which bodes well for its future prospects,” said  Nielsen in a statement.

“In addition, a positive build up to the elections in August will also help to stabilise and improve the consumer confidence index in the next quarter.” 
The Nielsen global survey was conducted between October 31 and November 18 last year and polled more than 30,000 online consumers in 60 countries throughout Asia-Pacific, Europe, Latin America, the Middle East, Africa and North America.

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