As expected, annual urban headline inflation was up in December after two months of disinflation: A combination of the unfavorable base-year effect and lagging global-driven inflationary pressures put annual inflation right back on the rise, which is likely to continue hovering around 6-7% in Q1 2022. In December, urban headline inflation increased to +5.9% y/y (vs. +5.6% y/y in November 2021), slightly lower than our forecast of +6.1% y/y. The increase was mainly attributed to the acceleration in both food basket inflation at +8.4% y/y (vs. +8.1% y/y in November) and non-food inflation at +4.6% y/y (vs. +4.3% y/y in November). Driven by global prices, the increase in annual food inflation is concentrated mainly in four baskets. Bread and cereals (+5.5% y/y vs. +4.6% y/y in November); dairy and eggs (+11.3% y/y vs. +10.7% y/y in November); edible oil and fats (+34.6% y/y vs. +33.7% y/y in November); and sugar and related products (+4.7% y/y vs. +5% y/y in November). Meanwhile, the decline in vegetable prices eased to -9.6% y/y (vs. -12.3% y/y in November), and fruit inflation fell further to +10.85% y/y (vs. +15.1% y/y in November). Non-food inflation also came to reflect global pressures as the inflation of gas and fuel (sub-basket of housing and utility basket) rose following the government’s decision to hike prices of subsidized butane gas cylinders, which also affected food catering services inflation.
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Mona Bedeir
Chief Economist
T +202 3300 5722