Why Egypt's annual inflation jumps to 32-month high in February 2022?

CBE attributes increase in annual urban inflation to strong monthly food dynamics in February

Egypt's annual headline urban inflation increased to 8.8% in February 2022 from 7.3% in January 2022, marking the highest rate since June 2019, according to the Central Bank of Egypt (CBE).
The CBE issued a report on Wednesday detailing the reasons behind the inflation increase.
The bank attributed the increase in annual inflation to strong monthly food dynamics in February 2022, as well as, the partial impact of unfavourable base effects stemming from muted inflationary pressure in February 2021.
This comes as monthly urban inflation recorded 1.6% in February 2022 compared to 0.2% in February 2021.
Monthly urban inflation in February 2022 was mainly driven by higher prices of volatile food items, especially, perennial vegetables (e.g. tomatoes, cucumber, eggplant), in addition to higher prices of core food items, mainly poultry, market rice, red meat, eggs, and pasta. Such increase broadly reflects adverse weather conditions affecting crops, as well as, the impact of surging international prices on domestic prices of feed, which affected poultry, eggs, and red meat prices.
This was further supported by slightly higher prices of non-food items which mainly reflected the increase in expenditures on restaurants and cafes, personal care products and, the increase in prices of select fuel products, as announced by the Fuel Indexation Committee in February's review.
On an annual basis, the increase in headline inflation during February 2022 was mostly driven by the higher annual contribution of food items, as annual food inflation continued its upward trend that started in May 2021 (except for November 2021) to record 17.6% in February 2022 compared to 12.4% in January 2022, which is the highest rate recorded since November 2018.
On the other hand, the increase in non-food items' contribution came as annual non-food inflation slightly increased, for the fourth consecutive month, to record 5.2% in February 2022 from 5.1% in January 2022.
Driven by higher annual contributions of core food and retail items, annual core inflation increased – for the sixth consecutive month – to 7.2% in February 2022 from 6.3% in January 2022, the highest rate since May 2019.
This comes as monthly core inflation recorded 1.2% in February 2022 compared to 0.3% in February 2021.
Nationwide annual inflation and annual rural inflation increased to 10.0% and 11.3% in February 2022 from 8.0% and 8.7% in January 2022, respectively.
Prices of fresh vegetables increased by 21.0%, while prices of fresh fruits increased by 5.0%. Together, fresh vegetables and fresh fruits contributed by 0.74% to monthly headline inflation.
Prices of poultry increased for the second consecutive month by 10.2%, to contribute by 0.39% to monthly headline inflation.
Prices of eggs increased for the second consecutive month by 4.4% to contribute by 0.05% to monthly headline inflation.
Prices of red meat increased by 1.2% to contribute by 0.05% to monthly headline inflation.
Prices of market rice increased by 4.9%, recording the highest increase since December 2018, to contribute by 0.05% to monthly headline inflation.
Prices of dairy products increased by 1.2%, to contribute by 0.04% to monthly headline inflation.
Prices of pasta increased by 4.6%, to contribute by 0.03% to monthly headline inflation.
Prices of other core food items, including fish and seafood, pulses, market sugar, fats and oils increased to contribute by 0.07% to monthly headline inflation.
Prices of regulated items increased by 0.2%, to contribute by 0.04% to monthly headline inflation. This was mainly due to the increase in the prices of select fuel products, as announced by the Automatic Fuel Pricing Committee in February's review.
Prices of services increased by 0.3%, to contribute by 0.11% to monthly headline inflation.
This was mainly due to the increase in expenditures on restaurants and cafes, prices of outpatient services, as well as handcrafts services.
Prices of retail items increased by 0.3%, contributing 0.04% to monthly headline inflation. This was mainly due to the increase in the prices of personal care products and household cleaning products.
Monthly core inflation was affected by price changes of the aforementioned core CPI items. Core food items contributed by 0.96% to monthly core inflation. Services contributed by 0.15% to monthly core inflation. In addition, Retail items contributed by 0.06% to monthly core inflation.