Kenya National Bureau of Statistics is expected to release Consumer Price Indices (CPI) and rate of inflation for July 2012 any time today. Based on our analysis, we expect a drop in the Housing, Water, Electricity, Gas and Other fuels’ index mainly on account of reduced costs of electricity and kerosene.

The latest fuel price review saw the retail price of kerosene drop by KES 8.8, from KES 83.20 to KES 74.40 in Nairobi. Kenya Power also announced a reduction in electricity costs this month due to increased hydro generation which resulted in reduced production on energy from expensive diesel plants. Kenya power had announced that it will charge consumers KES 5.52 per kilowatt hours for fuel this month as opposed to KES 5.97 per kilowatt charged in June.

Similarly, we expect a decrease in the Transport index following reduction in costs of petrol and diesel.

In light of this, we expect a drop the CPI and overall inflation rate to stand below the 10 per cent mark in July 2012.

The CPI posted for June 2012 stood at 133.06, down from 134.09 in May 2012. This resulted in a drop in the overall inflation rate which was posted at 10.05 per cent.

The drop in CPI was attributed to a 1.91 per cent drop in the food and Non Alcoholic drinks’ index. This was mainly due to fall in prices of food products such as milk, potatoes, tomatoes, cabbages, onions, oranges and sukuma wiki in June compared to May 2012.

The Housing, Water, Electricity, Gas and Other fuel’s index also decreased by 0.20 per cent, between May and June 2012 mainly due to reduced costs of electricity, kerosene and cooking gas.

The Transport index decreased by 0.35 per cent over the same review period due to to lower costs of petropl, diesel and public transport fares.

Inflation should go down this month.