Much Higher Inflation … and Longer
The first figure in double digits since May 2019, March’s annual urban headline inflation came well above the CBE’s target. Annual urban headline inflation accelerated to +10.5% y/y in March from +8.8% y/y in February 2022, owing to a cocktail of an unfavorable base-year effect, demand seasonality induced by Ramadan, and the effect of higher global commodity prices—primarily food. The acceleration in inflation came to reflect the sustained rise in food basket inflation at +19.7% (vs. +17.6% y/y in February) and non-food inflation to +6.5% y/y (vs. +4.9% y/y in January), the strongest non-food inflation figure in over a year. The sharp increase in wheat prices triggered by the Ukrainian crisis and its influence on supply accelerated bread and cereals basket inflation to +19.1% in March (vs. +9.4% y/y in February). Meanwhile, inflation in most food basket constituents rose in March, except for volatile fruit and vegetable (+5.9% y/y and +32.6% y/y compared to +12.4% y/y and +41.9% y/y in February, respectively). Meanwhile, non-food inflation was mostly driven by increasing housing and utility expenses as a result of rising costs for domestic and commercial butane gas cylinders, which also boosted hotel and restaurant prices.
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Mona Bedeir
Chief Economist
T +202 3300 5722