Kenyan households are facing renewed financial pressure after annual inflation rose to a three-year high of 7.3 per cent in October, driven by higher fuel and food prices that are eroding consumers’ purchasing power.

The inflation rate increased from 6.8 per cent in September, reaching levels last recorded in July 2023, according to the latest Consumer Price Index report by the Kenya National Bureau of Statistics (KNBS), released on Friday.

The increase means the general price level was 7.3 per cent higher in October than in the same month last year, adding to the pressure on households already grappling with rising transport, food and other essential expenses.

KNBS director general Macdonald Obudho said the increase was primarily driven by higher prices in the food and non-alcoholic beverages, transport, and housing, water, electricity, gas and other fuels categories.

“These three divisions together account for over 57 per cent of the total weight across the 13 major expenditure categories,” the report said.

Food and non-alcoholic beverages inflation rose to 10.2 per cent in the year to October, while transport recorded the highest increase at 17.1 per cent. Housing-related costs increased by 3.7 per cent over the same period.

Transport costs rose faster than overall inflation, while food prices continued to weigh heavily on household spending.

Fuel prices were a major contributor to the latest increase. The average retail price of petrol rose by six per cent between September and October to Sh227.85 per litre, while diesel increased by 4.4 per cent to Sh228.77.

Kerosene prices rose by 14.7 per cent to Sh220.88 per litre, increasing the cost of cooking and other household energy needs.

Higher fuel prices could also affect the cost of transporting goods and providing services, adding to businesses' operating expenses and potentially putting further pressure on consumer prices.

Transport fares also increased in some areas. The average fare for a country bus or matatu journey between Kabarnet and Nakuru rose by 8.3 per cent to Sh650, while the fare between Westlands and Kangemi in Nairobi increased by 25 per cent to Sh50.

In Siaya town, boda boda fares between the town and Awelo increased by 40 per cent to Sh70.

Food prices also rose, despite declines in selected commodities. The average price of a 500-millilitre packet of fresh milk increased by 4.7 per cent in October to Sh64.13, while a kilogramme of cabbages rose by 4.1 per cent to Sh82.38.

A litre of fresh, unpacketed milk increased by 3.9 per cent to Sh80.58, while a kilogramme of Irish potatoes rose by 2.5 per cent to Sh125.06.

The price of two kilogrammes of white wheat flour increased by 2.1 per cent to Sh184.88, while cooking oil rose by 0.5 per cent to Sh361.04 per litre.

However, sugar prices fell by 1.2 per cent to Sh163.84 per kilogramme, while oranges declined by 1.1 per cent to Sh125.81. KNBS also reported a 1.1 per cent decline in the price of loose maize flour.

The latest increase extends the upward inflation trend recorded in recent months. Annual inflation stood at 6.4 per cent in June, 6.5 per cent in July, 6.6 per cent in August and 6.8 per cent in September before rising to 7.3 per cent in October.

The overall Consumer Price Index increased from 156.47 in September to 157.60 in October, translating into a monthly inflation rate of 0.7 per cent.

The increase also reflects the continued influence of non-core items, particularly food and fuel, on the cost of living. Non-core inflation rose to 15.1 per cent in October, compared with core inflation of 4.3 per cent.

Food and non-alcoholic beverages contributed 3.1 percentage points to overall inflation, while transport contributed 1.7 percentage points, highlighting the impact of these essential expenses on household budgets.

For households, the latest figures mean incomes must stretch further to meet basic needs.

Families that spend a substantial share of their earnings on food and transport are particularly exposed, as rising costs leave less money available for savings, education, healthcare and other expenses.

Businesses could also face higher operating costs as fuel and distribution expenses squeeze margins. At the same time, consumers facing financial pressure may reduce spending on non-essential goods and services.

The latest inflation reading raises concerns about the rising cost of living, with food and energy prices likely to remain key factors influencing household finances in the coming months.