Macro Analysis /

Egypt Inflation Monitor – April inflation surprises positively

    Lower than expected monthly inflation rate pre-Ramadan

    The monthly total Egypt inflation rate decelerated to 0.4% in April 2019; its lowest MoM increase since the deflation of December 2018. The annual inflation rate fell to 12.5% in March 2019, picking up where it left off in December and January with 11.1% and 12.2%, respectively. The monthly inflation figures were lower than our expectations, probably driven by the discounted food items the government released in the market pre-Ramadan. 

    The monthly inflation drop in April was mainly attributed to Food & Beverages inflation slowing down to 0.3% from 1.5% in March, hitting its lowest level since the negative level of December 18. This has offset the increased growth in both Clothing inflation rate to 1.9% from 0% in March, and in Recreation & Culture inflation rate of 2.5% from 0% in March, both categories growing at their highest rate since March 2018, but with low weights in the basket. On the other hand, the deceleration in Food & Beverages to 12.8% YoY from 15.1% YoY in March could also explain the annual disinflation recorded in April 2019. 

    Inflation is driven by the food & beverage sub-index 

    The category contributing the most to the Annual inflation in April continues to be food and beverage, rising by 7.14%, followed by Housing & Utilities rising by 1.55% and finally Transportation rising by 1.08%. Within the food and beverage category, the main drivers were fruits, increasing at 11.6% YoY (its all time highest level) but contributing 0.37% given its small weight, and vegetables, which decelerated from last month to  29.3% YoY but contributed 4.08% to overall inflation given the higher weight attributed to it. Monthly inflation was also heavily driven by fruits within the food & beverage sub-index.