Over half of retail business outlets in Kenya reported reduced customer traffic in the three months to December 2023 owing to tough economic times that saw consumers cut on spending.

According to fund manager ICEA LION Asset Management's first quarter 2024 ILAM Consumer Spending Index, clothing outlets were the worst hit with 61 percent of businesses reporting a decline in sales.

However, the survey shows that individual spending recorded a 36 percent uptick between October and December 2023 and a further 6 percent between January and March, largely driven by women and consumers aged between 18 and 35. "The rise in spending was attributed to higher cost of items purchased," the Index notes.

In the quarter under focus, 57 percent of house fittings and accessories shops as well as 56 percent of restaurants, bars, and leisure destinations reported a dip in sales.

The index shows that for retail outlets within Nairobi, 51 percent recorded reduced customer traffic thereby recording lesser sales while about 62 percent of businesses in upcountry regions experienced a dip in sales.

"For the 44 percent of businesses that saw an increase in sales, the majority reported an increase ranging from 6 percent to 20 percent," said Judd Murigi, Head of Research, ICEA LION Asset Management.

Further, the survey shows that a third of consumers in Kenya are cutting non-essential expenditures in response steady rise in prices of products and services with a quarter of those surveyed opting to reduce the quantity of their essential purchases.

What's more, the study shows that 18 percent of consumers in Kenya are turning to their savings to help meet the rising cost of essential commodities while 15 percent are scouting for additional income streams such as jobs to plug the deficit.

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Borrowing to make purchases

According to the survey, 27 percent of respondents reported a decrease in incomes with almost a similar percentage (27) noting that their incomes increased in the three months to March 2024.

"Borrowing and utilising credit options comprise 11 percent of respondent's strategies for coping with price increase," Mr Murigi explained.

Overall, the ILAM Consumer Spending Index rose by 18 percent to 116 in the final quarter of 2023 and decreased by 5 percent to 110 in the first three months of 2024. The index base of 100 is based on consumer spending in Nairobi trends in the second quarter of 2023 and had initially fallen to 97 in the three months to September 2023.

"Individual spending trends exhibited positive trends while retail business sales came under pressure in the first quarter of 2024," noted ICEA LION Asset Management CEO Einstein Kihanda.

Looking ahead, a majority of consumers in Kenya or 78 percent forecast that they will increase their expenditure on essential items in the second quarter of this year with 19 percent anticipating increased expenditure on non-essential items in the three months to June.

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