CBE explains reasons behind decline in inflation in June

Annual headline urban inflation decelerated for the first time after increasing for six months to record 13.2% in June 2022, down from a peak of 13.5% in May 2022

Annual headline urban inflation decelerated for the first time after increasing for six months to record 13.2% in June 2022, down from a peak of 13.5 % in May 2022, which was the highest rate since May 2019.
June 2022's inflation figures were mainly impacted by a strong decline in prices of volatile food items, which can be attributed to the high temperatures witnessed lately and their effect on the harvests, hence the increased supply of many agricultural products. This comes as monthly headline urban inflation recorded -0.1% in June 2022 compared to 0.2% in June 2021.
Monthly headline urban inflation in June 2022 reflected lower prices of volatile food items, which were mostly offset by an increase in the prices of all the remaining CPI basket.
The strong decline in volatile food items was mainly driven by lower prices of fresh vegetables (specifically tomatoes) for the second consecutive month, as well as lower prices of fresh fruits for the first time since January 2022.
On the other hand, higher prices of core food items reflected the seasonal increase in prices of beef, which is consistent with the advent of Eid Al-Adha, as well as the increase in prices of poultry, fish, seafood, and dairy products.
Meanwhile, the broad-based increase in prices of non-food items included — but was not limited to — higher tobacco, clothing, and household cleaning products' prices, as well as higher expenditures on cafes and restaurants.
On an annual basis, headline inflation in June 2022 was driven by the lower annual contribution of food items, as food inflation declined for the second consecutive month to record 22.3% in June 2022 from 24.8% in May 2022.
Despite the recent deceleration, annual food inflation continued to record high levels over the past three months, exceeding a 20% threshold that had not been breached since October 2018.
Meanwhile, annual non-food inflation increased for the eighth consecutive month to record 9.1% in June 2022, up from May 2022's 8.6%, which is the highest rate recorded since May 2019.
Driven by broad based higher annual contributions, annual core inflation increased for the tenth consecutive month to record 14.6% in June 2022, up from 13.3% — the highest rate since December 2017. This comes as monthly core inflation recorded 1.2%, compared to 0.1.
Furthermore, nationwide annual inflation and annual rural inflation declined to record 14.7% and 16.2%, up from 15.3% and 17.2%, respectively.
The prices of fresh vegetables and fresh fruits declined by 19.8% and 15%, respectively. Together, they contributed -1.05 percentage points to monthly headline inflation. This partly reflected the dissipation of the shock in tomato prices that took place in April 2022.
Moreover, the prices of beef increased by 2.6% to contribute 0.11 percentage points to monthly headline inflation. It is worth noting that the prices of beef have been increasing for 18 consecutive months, with the cumulative monthly increase reaching 22.3%.
Also, the prices of dairy products increased by 1.9% to contribute 0.07 percentage points.
Additionally, the prices of oils and fats increased by 1.7% to contribute 0.06 percentage points.
The prices of fish and seafood increased, as well, for the sixth consecutive month by 2.2 % to contribute 0.05 percentage points.
Furthermore, the prices of poultry increased by 0.9% to contribute 0.04 percentage points.
The prices of market rice also increased by 1.9% and have been increasing for the past year, contributing 0.02 percentage points.
Moreover, the prices of pasta increased for the ninth consecutive month by 2.7% to contribute 0.02 percentage points.
The prices of other core food items — including wheat flour, market sugar, and market tea — increased to contribute 0.09 percentage points.
Additionally, the prices of services increased by 0.7% to contribute 0.23 percentage points. This was mainly due to the increase in expenditures on restaurants and cafes, outpatient services, haircuts, summer vacations, air transportation, and rental values.
Furthermore, the prices of retail items increased by 1.3% to contribute 0.17 percentage points to monthly headline inflation. This was mainly due to the increase in the prices of clothing, household cleaning products, personal care products, and the purchase of vehicles.
The prices of regulated items also increased by 0.2% to contribute 0.06 percentage points. This was mainly due to higher prices of tobacco products, issuance fees of official papers, and inland transportation.
Meanwhile, monthly core inflation was affected by the price changes of the aforementioned core CPI items. Core food items contributed 0.65 percentage points to monthly core inflation, while services contributed 0.32 percentage points, and retail items contributed 0.23 percentage points.