KASI consumer-sentiment index rose 18% percentage points in May from -33 to -27
Ease of lockdown and low inflation drive positive sentiment
Job prospect improved slightly but household income remains tight
May 2020 Release: While not at the positive level of consumer sentiment seen in February, the consumer-sentiment index rose from -33 to -27 in the month of May. This increase was led by a 6-point increase in both the index of current economic conditions as well as the index of future consumer expectations, showing that citizens are not only positive about the current economic climate but are optimistic about the future as well. Kenyans are known for their positivity. In fact, they were ranked number one on the World Happiness Report of 2020 amongst all east and central African countries. Hence, even during this dire time, citizens choose to remain optimistic about the future.
Chief Administrative Secretary for health, Dr. Mercy Mwangangi notes that many people began going back to work around mid-May, resuming life as though the virus were old news. This trend is shown in the fear index below where the general level of fear dropped 12% in the last month. This means that more people have ranked their fear in relation to the virus at levels 1 and 2 (low) rather than at 4 and 5 (high) in comparison to last month. As a result, by the end of the month, both human and vehicle traffic in Nairobi was back to its normal levels.
While job prospects recovered slightly, consumers still worry about meeting basic monthly needs.
Looking at the individual questions of the survey distributed, citizens indicated that their optimism about job prospects has risen by 3 points. Yet, despite these figures, their confidence to meet monthly basic needs for the next six months has fallen by 3 points from -8 to -11. The increase in job prospects can be related to the ease of the lockdown which has allowed labor in certain sectors of the economy to go back to work. However, the nature of the Kenyan labor market was not made to withstand a pandemic. With over 15 million employees employed in the informal sector doing jobs like cleaning, washing clothes, or other forms of manual labor, many still remain unemployed despite the lax restrictions. This is because many individuals of the higher socio-economic class who employ these manual labor workers still fear to allow them into their homes. Thus, while there is some increase in optimism regarding job prospects, it is not material enough to make people confident about meeting their basic needs. Especially because many low-income individuals still haven’t got their jobs back due to social distancing and health concerns. Amidst the growing number of Coronavirus cases, going back to the world they once knew seems to be getting less and less likely.
Low inflation may be pushing consumers to think about making discretionary purchases (Electronics etc.)
The largest positive change was seen in the sub-index describing the attractiveness of making large purchases such as furniture and electrical appliances. This may be explained by the fact that Kenya’s May inflation rate hit a 7-month low of 5.47%. This is the lowest inflation has been since last October. A lower overall price level may in fact be a factor inducing optimism and higher consumer confidence despite the lockdown. Going back to the previous point made, many middle and higher-income individuals who have resumed working may be the ones pushing this positive sentiment as they earn higher incomes as restrictions lessen. As incomes become more steady, generally consumers feel more confident about making discretionary purchases.
By Tanya Gandhi, Economic Intelligence Group at KASI.
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About the methodology
KASI Consumer Confidence Score (KASI CCI) is a composite index compiled from a seven-question survey that runs monthly via our consumer polls in the countries covered. The data output is based on a fresh, randomly selected representative sample of city dwellers aged 18-64. Released the first week of every month, KASI CCI provides a focused view on consumer perceptions in seven African urban centers (Ghana, Nigeria, Kenya, South Africa, Cameroon, Ivory Coast, Tanzania) where most spending in the continent is concentrated.
For each question, the final metric will be a ‘balance measure’ of the percentage of positive responses minus the percentage of negative responses. The overall metric will be an average across all the questions.
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