Annual urban inflation rose to 5.9% in December from 5.6% in November, ending a two-month downward trend despite a slowdown in food price inflation, according to figures released yesterday by statistics agency Capmas. On a monthly basis, consumer prices fell for the first time in 11 months, dipping 0.1% due to a 1.1% fall in food prices. The annual rate remains at the lower end of the central bank’s 7% (±2%) target range by 4Q2022.

Annual core inflation hit its highest level since June 2019, climbing to 6% y-o-y from 5.8% in November, according to Central Bank of Egypt data (pdf). The core index removes volatile items such as food and fuel from the headline annual urban rate.

What’s behind the headline figure? Less expensive vegetables didn’t outweigh an unfavorable base effect: A slower-than-expected rise in food and beverage costs led to a more muted rise in the annual headline figure than some had anticipated. Food and beverage costs (which make up the largest component of the basket of goods used to measure prices) rose 8.4% on an annual basis but fell 1.0% from November, Capmas said. Vegetables were the only item included in inflation figures to register a y-o-y decrease in price, falling 9.6% on an annual basis and 7.1% on a monthly basis.

Analysts were expecting prices to rise faster: December’s headline rate was lower than CI Capital’s expectation of around 6.5% y-o-y, but in line with their 2H2021 estimate average of 6%, according to a note. The latest reading takes the average rate for the second half of 2021 to almost 5.9%, it added. The figure also came in lower than Prime Research’s 6.1% prediction, the brokerage said in a note.

Also rising last month: Housing and utility prices rose by 4.2% y-o-y, largely on the back of an 11.6% increase in gas, electricity, and other fuel prices, while clothing and footwear rose to 2.7% from 1.2% the month prior. Healthcare costs rose 2.7% annually, transport increased 4.8%, while recreation and culture rose by 14.8%.

LOOKING AHEAD- EFG Hermes said in a note yesterday that it expects “inflation to accelerate to an average 7% in 2022, from 5.2% in 2021, as more of global inflation filters through into the local market.”