ILAM Consumer Spending index 3rd quarter report
Since January, 2024 the ICEA LION Asset Management (ILAM) has been releasing quarterly Investor Pulse Reports dubbed as the Consumers Spending Index and divided into individual spending sub-index and retail business sales sub-index. As East Africa’s pioneering investment management firm, ILAM released the 3rd Quarter consumer index on July 28th, 2025 under the theme was released by ‘Local markets outperform global markets’ in Nairobi. Key findings from the Q2 2025 ILAM consumer spending Index were also shared. These track consumers spending as an indicator of real economy trends. It is noteworthy that the Q3 2025 index draws data from interviews with approximately 1,200 consumers and over 200 retail businesses across major urban centres in Kenya.
“For the last 18 months we’ve done our best in releasing the report in an endeavor to understand the international and local markets and consequently in order for us to give our investors the best insights. From the reports, we also work to provide the best investments solutions and tools,” explained ILAM CEO & Einstein Kihanda at the report launch event.
Evidently commendable, in the Retail Business Sales Sub-Sector Small businesses (SMEs) represented the largest portion of the interviewed sample, comprising 49 per cent of the total businesses surveyed. Moreover, retail stores and restaurants emerged as the predominant sectors, constituting 48 per cent and 28 per cent of the interviewed businesses respectively. Overall, 54 per cent of businesses reported an increase in sales, while 46 per cent noted a decrease.
Meanwhile, ILAM’s Senior Portfolio Manager, Esther Muchai, revealed that global growth forecasts have been adjusted downwards as uncertainty scales to higher levels due to trade policy uncertainty and persistent geopolitical tensions around the world. Global headline inflation is expected to decline at a slower pace than previously projected affecting policy rate changes globally. “We are likely to witness global market structural changes in the long-term emanating from geopolitical realignments and trade policy shifts” she explained.
And despite the global financial markets being characterized by volatility, its performance seems to have recovered from the big market shocks in the first quarter of the year. And although significant uncertainty remains, the extension and pause in tariff implementation offers investors some relief and are better placed in pricing in the near-term risks.
A stronger local economic performance compared to recent years’ performance may be affected by social unrest and weak private sector credit expansion seen in mid-2025; this could hinder economic growth for 2025. The Central Bank of Kenya (CBK) projects a higher GDP growth in 2025 compared to last year, driven by the expected recovery in growth of credit to the private sector, and improved exports, among other factors. The macro-economic environment has remained supportive with anchored inflationary pressures and currency stability.
Kenya has seen a stellar stock market driven by higher demand. Essentially, the Nairobi Securities Exchange (NSE) performance has remained strong with attractive valuations. Foreign and local demand has remarkably improved this year due to currency stability and lower fixed income returns.
ILAM’s Head of Research Judd Murigi presented key findings from the index:
According to the report, individual spending trends peaked on higher prices this being the first time, since the index’s inception in Q3 2023 (resulting in the report launch in January 2024), that a higher proportion (85 per cent) of consumers indicated that they had spent more in the quarter compared to the similar quarter last year. The increased spending was attributed primarily to higher prices of items purchased.
Over half of respondents in Eldoret saw their income rise, the highest of urban centres surveyed, while Nyeri and Kisumu had the highest proportion of respondents who experienced lower incomes compared to the same period in 2024.
In terms of income categories, the lower income and lower middle income categories had the highest proportion of declined incomes over the past 12 months
In terms of economic sectors, the education, training and transport and logistics have the highest proportion of workers reporting higher incomes, while those engaged in the trade sector had the highest proportion of reduced incomes since the second quarter of 2024.
The report indicated that majority of the respondents continually prefer investing in SACCOs, banks and chamas respectively. Financial market instruments such as unit trusts and shares still lagged behind in terms of investment preference. Notably, investors were mainly driven by returns, practicality, and safety of investment options.
Retail sales trends have remained broadly consistent with over half of retail businesses having reported higher sales in Q1 2025 compared to Q1 2024, while 46 per cent experiencing lower sales. This, however, is deterioration from the previous two quarters when almost 60 per cent of retail businesses reported improved sales.
For the second quarter in a row, sales increases were mainly attributed to more customers, rather than price hikes. Businesses reporting lower sales attributed the trend to higher operating costs.
In terms of sectors, apparel and food and beverage outlets had the most improved sales trends compared to the same period in 2024.
Mombasa and Nairobi had the highest proportion of retail businesses recording higher sales during the quarter, while Nakuru and Nyeri had the highest proportion of businesses with lower sales. The index rose by 2% compared to Q1 2025 with higher individual spending trends offsetting lower retail sales trends.
In his final remarks, ILAM CEO Kihanda affirmed that local markets continue to offer better risk-return dynamics in 2025 compared to other global markets.
