The food commodities price hikes—on the back of the rising cost of production—have driven the basic annual inflation rate at the Central Bank of Egypt (CBE) up to over 25% at the end of December 2016, becoming its recorded highest since 2005.
In a report issued on Sunday, the CBE explained the reasons behind the hike in inflation, noting that the high prices of sugar and rice contributed to the high rate.
The headline inflation represented by the Consumer Price Index (CPI) and published by the Central Agency for Public Mobilization and Statistics on 10 January showed an increase of 3.13% in December 2016, compared to 4.85% in November 2016 (month-over-month). The annual rate increased to 23.27% in December from 19.43% in November.
“The monthly increase was mainly driven by higher prices of core food items due to cost push effects, in addition to continued supply shocks related to rice and sugar,” the CBE report read.
The CBE stated that given the increase in core items, the core CPI computed by the CBE itself accelerated by 4.35% in December 2016 compared to 5.33% in November 2016, and the annual rate increased to 25.86% in December from 20.73% in November.
Moreover, the headline CPI rose by 3.13% in December 2016 compared to 4.85% month-on-month, according to the CBE.
The report said that the annual rate increased to 23.27% in December from 19.43% month-on-month.
It pointed out that the prices of red meat and poultry increased by 6.15% and 5.30%, respectively, jointly contributing by 0.71% to the monthly headline inflation.
Meanwhile, the report stated, the prices of milk, cheese, and eggs increased by 5.55%, which contributed by 0.34% to the monthly headline inflation, due to the increase in the prices of milk by 6.2%, cheese by 6.8%, and eggs by 3.5%.
It added that rice prices continued to increase, registering 13.99% and contributing by 0.38% to the monthly headline inflation. This brings the cumulative monthly increase during 2016 to 65.12% due to domestic supply shocks, according to the CBE.
Similarly, the prices of sugar and confectionary increased for the sixth consecutive month, growing by 6.99% to contribute by 0.12% to the monthly headline inflation, partly due to domestic supply shocks and the increase in international prices. This brings the cumulative monthly increase during 2016 to 47.57%.
The prices of fresh fruits increased by 5.89%, according to the CBE, while the prices of fresh vegetables declined by 0.18%. Together, they contributed by 0.11% to the monthly headline inflation.
The prices of regulated items slightly increased by 0.09% to contribute by 0.02% to the monthly headline inflation, driven by the increase in the prices of public hospitals, according to the CBE.
In addition, the CBE stated that its CPI increased by 4.35% in December 2016 compared to 5.33% in November, which is significantly above the average monthly pace during the first eleven months of 2016 that records 1.73%. The annual rate increased to 25.86% in December from 20.73% in November.
The CBE explained that the monthly dynamics were mainly driven by the developments in the prices of previously mentioned core food items, which contributed by 3.51% to the monthly core inflation. This came in addition to the increase in the prices of retail items, other services, and paid services that contributed by 0.25%, 0.36%, and 0.23%, respectively.