Consumer spending up by 5.5% in three months to June on higher prices

Several reasons can trigger a strong labor market and high employment confidence can drive increased consumer spending. On the other hand, high price inflation does not empower consumers to spend.

By Steve UMIDHA On Jul 29, 2024

By Rodney LUBOGA

In the three months to June 2024, the consumer spending index grew by 5.5 percent, according to the ICEA Lion Asset Management’s (ILAM) second quarter 2024 Consumer Spending Index, which attributed the rise to individual spending increased during that period.

Individual spending trends improved by 11 percent in the quarter under review.

Generally, higher household incomes can drive consumer spending and stimulate aggregate demand. In response, businesses often raise prices for goods and services, which can lead to inflation.

Indeed, the report noted that the additional spending was mainly driven by women and consumers aged between 26 and 35, with the rise in spending largely attributed to higher cost of items purchased.

Workers in the manufacturing and education sectors had the highest proportions of improved incomes while those in the trade, transport and logistics sectors had the largest proportion of reduced incomes.

“Half of respondents indicated static income levels over the last year, while 30% reported lower income and less than 20% saw their incomes rise in the second quarter of 2024 compared to the same period in 2023.

This represented a deterioration from the first quarter of 2024 when 25% of respondents noted increases and decreases in their income respectively,” noted Richard Muriithi, Senior Portfolio Manager at ICEA LION Asset Management.

In terms of business sectors, the clothing, retail shopping and food & beverage sectors saw an improvement in sales trends in the second quarter but this was offset by a plummeting of sales trends in the house fittings and accessories sectors.

ICEA LION Asset Management CEO – Einstein Kihanda, who is also the immediate former Chairman of the Institute of Certified Investment and Financial Analysts (ICIFA) summarized thus: “Individual spending trends continued to remain resilient in a challenging economic environment while retail business sales trends remained relatively muted.”