Kenya records lower inflation in October

November 3, 2009

, NAIROBI, Kenya Nov 3- Kenya’s inflation rate came down to 6.6 percent for the month of October from 6.7 percent in September.

This came as the Kenya National Bureau of Statistics (KNBS) said it had shifted to using a geometric mean method of calculating inflation.

KNBS Director General Anthony Kilele said the switch from the traditional arithmetic mean would give a new basket of goods and services with which to calculate the Consumer Price Index (CPI). However, the new basket of consumer goods will be factored in the calculation of inflation rates from February 2010.

The country has been using the arithmetic means, which has been widely criticised, with many arguing it had an upward bias to the computed index.

For example, the basket of goods and services consumed by households has also remained unchanged over the years and has been viewed as being vulnerable to erratic price movements in the market.

There have also been changing expenditure patterns for people in different geographic locations. Central Bank Governor Prof Njuguna Ndungu said the new measure would give a reflective situation of the economy.

Prof Ndungu said many investors who had misinterpreted previous figures were worried of the volatility in the market.

Countries such as Uganda and Tanzania have already adopted the new method, which has presented their inflation rates as being lower than that of Kenya.

International Monetary Fund Senior Country Representative, Scott Rogers said the move would put Kenya on level ground with other countries.

Mr Rogers said it would give a substantial improvement in the accuracy and measurement of inflation. He was however quick to add that it would not change the rate of inflation.

“It does not mean inflation is lower than what was being measured before,” he said arguing that the government would have to deal effectively to the changing price of commodities.

The implementation of the new formula will be in line with the International Labour Organisation CPI manual of 2004.

New items such as fresh milk; arrowroots and pork will now be included in the new basket bringing the number of commodities to 234 products from the initial 216.

During the period under review, fuel and power index increased by 0.95 percent from 134.27 points to 135.55 points. The increase was attributed to an increase in the cost of electricity, paraffin and charcoal.

Food and non-alcoholic drinks index went up 0.55 percent from 157.29 points in September to 158.15 points in October. This was attributed to rise in the price of English potatoes, beans, cabbages, beef with bones and sugar among other food items.

There was a considerable drop in the price of sifted maize flour (3.45 percent), tomatoes (3.49 percent) and onions (6.04 percent).

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