Favorable base effects and falling food prices lower inflation in Egypt: CBE

According to the Central Bank of Egypt (CBE), the annual inflation rate in Egypt's urban areas fell for the fifth consecutive month in July 2024, reaching 25.7 percent, down from 27.5 percent in June 2024.

The CBE attributed the continued decline to favourable base effects due to strong inflationary pressures in 2023, as well as a decline in both food and non-food inflation.

Annual food inflation fell to 29.7% in July 2024, compared to 31.9% in June 2024. The CBE attributed this decline mainly to a decline in core food prices. Non-food inflation also slowed, reaching 22.9% in July 2024, compared to 24.5% in June 2024.

Annual core inflation also declined, reaching 24.4% in July 2024, down from 26.6% in June 2024, its lowest level since December 2022. This steady decline over five months is reflected in monthly core inflation, which recorded minus 0.5% in July 2024, down from 1.3% in the same month in 2023.

Monthly urban headline inflation was 0.4% in July 2024, compared to 1.9% in the same month of 2023 and 1.6% in June 2024. Higher prices for volatile food items were partially offset by a decline in core food prices.

The annual inflation rate in rural areas also decreased from 26.6% in June 2024 to 24.7% in July 2024. In addition, the annual national inflation rate decreased from 27.1% in June 2024 to 25.2% in July 2024.

A closer look at the components of monthly headline inflation shows that fresh fruit prices rose by 2.2%, while fresh vegetable prices increased by 18.9%, contributing 0.71 percentage points to monthly headline inflation.

Poultry prices, on the other hand, fell by 11.2%, representing a contribution of minus 0.71 percentage points to monthly overall inflation.

Market rice prices fell by 1.3%, contributing minus 0.02 percentage points to monthly headline inflation. Oils and fats prices fell for the fifth consecutive month, falling by 0.7%, contributing minus 0.02 percentage points to monthly headline inflation.

Egg and dairy prices rose by 4.3% and 0.3% respectively, contributing 0.09 percentage points to the monthly headline inflation. Fish and seafood prices rose by 0.8%, contributing 0.02 percentage points. Other staples such as market sugar, pulses and market tea contributed 0.04 percentage points to the monthly headline inflation.

Prices for retail goods rose by 1.0%, contributing 0.13 percentage points to monthly headline inflation. The main reasons for this were clothing and footwear, household cleaning products and personal care products.

Despite a decline in Hajj and Umrah travel, prices for services rose by 0.4 percent, contributing 0.10 percentage points to the monthly headline inflation. The increase was mainly due to higher spending on restaurants and cafes, as well as rents.

Prices for regulated items rose 0.3 percent, contributing 0.05 percentage points to monthly headline inflation, mainly due to an increase in tobacco prices.

Monthly core inflation was affected by price increases in the above-mentioned core consumer price index items. Core food items contributed minus 0.80 percentage points to monthly core inflation, while retail items contributed 0.18 percentage points and services contributed 0.13 percentage points.