In line with our expectations, inflation fever kicked off in July as urban headline inflation accelerated to its highest reading in 2021. Annual urban headline inflation surged to 5.4% y/y in July 2021, up from 4.9% in June 2021, mainly driven by the compound effect of fuel, electricity price hikes, and unfavorable base-year effect. Food inflation continued to lead the driving force of inflation, surging to 4.8% y/y—the highest level since in almost two years. This came against the backdrop of an increase in inflation of:
(1)meat and poultry (+6.2% y/y in July vs. +3.2% y/y in June).
(2)dairy and eggs (+6.2% y/y in July vs.+4.5% y/y in June).
(3)vegetables (+5.4% y/y in July vs. +3.8% y/y in June).
Moreover, non-food inflation also heated up to reach +6.1% y/y in July vs. +5.7% in June, driven mainly by the contribution of housing and utilities, medical care, transportation, and clothing baskets.
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Mona Bedeir
Chief Economist
T +202 3300 5722