Transportation costs jumped by a quarter last month despite a drop in fuel inflation following state intervention to stop rising prices at the pump.
With fuel prices at a 10-year high, the Energy and Petroleum Regulatory Authority (Epra) has refrained from increasing the pump price for diesel despite an increase in the landed cost, instead of maintaining a lower oil trader’s margin of Sh11.72 per liter of diesel instead of the normal Sh12.36.
The price of diesel has a huge impact on the cost of goods and personal budgets, as it is the common fuel for public transport vehicles and freight carriers.
An NCBA analyst said in a note that the easing of fuel inflation from 14.8% in April to 14.4% in May reflected the slow increase in fuel prices following the temporary measures, but may increase further if world prices continued to rise.
“This reflects a slower increase in prices at the pump over the period. Even then, pricing pressures could remain in double digits due to weak base effects and the potential rise in global crude oil prices as demand increases, ”NCBA analysts said.
“This can put upward pressure on transport costs. In May, matatu / bus fares increased by 25.4 percent.
Overall, inflation remained subdued, edging up to 5.87 percent in May from 5.76 percent in April due to lower fuel prices and weak demand.
This despite an increase in food inflation from 6.4% to 7%, due to the higher cost of cooking oil, beef and cabbage, but analysts expect the rise to be contained. by favorable weather conditions which will ensure an abundant supply of fruits and vegetables.
“The risk of inflation accelerating beyond the higher target of 7.5% remains highly unlikely,” the NCBA said.