Central Bank of Egypt: Monthly Inflation Developments - January 2018

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1. Central Bank of Egypt Monthly Inflation Developments Headline and Core Inflation – January 2018  Annual headline1/ and core2/ (urban) inflation declined for the sixth consecutive month to record, respectively, 17.1 percent and 14.4 percent in January 2018 compared to 21.9 percent and 19.9 percent in December 2017, after peaking in July at 33.0 percent and 35.3 percent. The headline and core annual rates thereby registered, respectively, the lowest since October and September 2016.  This decline was supported by tighter real monetary conditions, and was accelerated by strong favorable base effects since November 2017.  Monthly headline inflation registered in January 2018 a negative rate for the second consecutive month, recording -0.1 percent after recording -0.2 percent in December 2017. This comes after stabilizing in the period between August and November 2017 at around 1.1 percent, affected by upward adjustments of regulated prices which accounted on average for 44 percent of monthly headline inflation. Headline and Core CPI Inflation 3/4/ Headline and Core CPI Inflation 3/4/ (m/m, in percent) (y/y, in percent) Core CPI Source: Central Agency for Public Mobilization and Statistics and Central Bank of Egypt. 36 32 28 24 20 16 12 8 4 0 CPI - All Items (100%) CPI excl. regulated items, fruits & vegetables (74.43%) Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Headline CPI Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 6 5 4 3 2 1 0 -1 -2 Source: Central Agency for Public Mobilization and Statistics and Central Bank of Egypt. 1/ Published by the Central Agency for Public Mobilization and Statistics. 2/ Computed by the Central Bank of Egypt. 3/ CAPMAS publishes three CPI series: (1) the CPI for urban areas which include Cairo, Alexandria, urban Lower Egypt, urban Upper Egypt, Canal cities and Frontier governorates, (2) the CPI for rural areas, and (3) the CPI for All areas. Numbers quoted in this note refer to CPI-Urban. 4/ It is important to underscore that the monthly percentage changes of both headline and core CPI between September 2009 and July 2010 do not th match rates of changes presented in previous inflation notes given the replacement of the 8 CPI series by the 9th series starting from August 2009 (Full details are discussed in the Technical Appendix of the August 2010 Inflation Note). 1
2. Central Bank of Egypt Monthly Inflation Developments  Food inflation resumed its downward trend since August 2017, registering consecutive negative rates over the last three months. Negative food inflation was witnessed for the first time since January 2016. In January 2018, lower food prices were driven by the negative inflation of fresh vegetables and by the continued muted inflation of core food items.  Prices of retail and services items remained broadly unchanged, while higher health insurance and natural gas installment costs affected regulated items.  Given the muted inflation of core CPI items, monthly core inflation inched up by 0.2 percent in January 2018 after decreasing by 0.4 percent in December 2017. This compares to a monthly core inflation rate of 1.3 percent in November and 0.7 percent in October, and an average of 0.3 percent in August and September. 2
3. Central Bank of Egypt Monthly Inflation Developments Contributions to Monthly Headline CPI Inflation Key Highlights : (in percentage point) 5.5 Prices of fresh vegetables declined for the 4.5 3.5 third consecutive month, decreasing by 2.87 2.5 percent, 1.5 while prices of fresh fruits increased by 2.44 percent. Together, they contributed by negative 0.26 percentage 0.5 -0.5 -1.5 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18  Fruits & Vegetables Regulated Items Core CPI points to monthly headline inflation. Source: Central Bank of Egypt. Prices of regulated items rose by 0.46 (in percentage point) points to monthly headline inflation. This 36 32 28 24 20 16 12 8 4 0 was due to higher prices of health insurance services and natural gas installment cost.  Contributions to Annual Headline CPI Inflation percent to contribute by 0.08 percentage Prices of cheese and eggs increased by 1.47 Fruits & Vegetables Regulated Items Core CPI Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18  and 2.60 percent, respectively. Together, they contributed by 0.08 percentage points Source: Central Bank of Egypt. to monthly headline inflation. Contributions to Monthly Core CPI Inflation  Prices of red meat remained unchanged in (in percentage point) January 2018 after declining in December Red meat prices had stabilized between September and November 2017 after recording increases since April 2016.  Prices of poultry declined slightly by 0.03 percent to record its eighth consecutive 6 5 4 3 2 1 0 -1 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 2017 for the first time since December 2015. Other Services Paid Services Retail Prices Poultry & Red Meat Food Prices excl. Poultry & Red Meat Source: Central Bank of Egypt. 3
4. Central Bank of Egypt Monthly Inflation Developments monthly decline . Contributions to Annual Core CPI Inflation (in percentage point) Prices of oil and fats increased by 0.65 percent to contribute by 0.02 percentage points to monthly headline inflation. This was due to higher prices of domestic butter.  Prices of other food and services items remained unchanged, while prices of retail items increased marginally by 0.05 percent 36 32 28 24 20 16 12 8 4 0 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18  Other Services Paid Services Retail Prices Poultry & Red Meat Prices Food Prices excl. Poultry and Red Meat Source: Central Bank of Egypt. due to gold prices.  Monthly core inflation was affected by price increases of the aforementioned core food items, which contributed by 0.16 percentage points to monthly core inflation. Retail items contributed by 0.01 percentage points to monthly core inflation. 4
5. Central Bank of Egypt Monthly Inflation Developments Table 1 . Classification of All Items included in Core CPI Food Retail Paid Services Other Services Bread and cereals Meat Fish and other seafood Eggs & Dairy products Oils and fats Clothing Fabrics Footwear Products related to dwelling repairement Furniture Tailors, laundry & shoe repair Dwelling maintenance services Portman & gardener's services Cook & maid's services Technicians to HH appliances Rentals (new law) Rental value of owner occupied housing Hospital services Transportation Services Mobile & internet services Dried fruits Carpets and other floor covering Repairs of Audio-visual equipment Recreational & sporting services Processed vegetables Pulses Sugar and confectionery Other food products Beverages Household (HH) textiles HH appliances Glassware, tableware and HH utensils HH small tools & supplies HH cleaning products HH miscellaneous products Purchase of vehicles Spare parts Motor oil Telephone & telefax equipment Home entertainment equipment Recreational equipment Personal care supplies and products Personal effects Books School supplies Medical care goods Physicians Mechanics Teachers Hairdressers Cultural services Hajj & Omra trips Restaurants and Cafes Accommodation services Private schools 5
6. Central Bank of Egypt Monthly Inflation Developments Table 2 . Consumer Price Index and Major Components 1/ Weight in January 2018 to January 2018 to January 2017 January 2018 basket 2/ December 2017 January 2017 (in percent) (index) (percentage change) (January 2010 = 100) Headline - All items 100.00 220.29 257.89 -0.06 17.07 39.92 278.36 325.26 -0.30 16.85 Tobacco and related products 2.19 400.66 518.35 0.00 29.37 Clothing and footwear Housing, water, electricity, gas and other fuels 5.41 156.93 198.23 0.00 26.32 18.37 140.62 155.85 0.21 10.84 Furnishings, household equipment and routine maintenance of the dwelling 3.77 197.08 223.76 0.00 13.54 Medical care 6.33 190.51 209.06 0.00 9.74 Transportation 5.68 176.13 205.11 0.00 16.45 Communications 3.12 98.59 109.41 0.00 10.97 Recreation and Culture 2.43 211.48 293.88 0.00 38.96 Education 4.63 246.00 294.16 0.00 19.58 Hotels, cafes and restaurants 4.43 257.23 292.51 0.00 13.71 Miscellaneous goods and services 3.73 150.24 185.31 2.49 23.34 6.90 396.57 500.71 -1.88 26.26 Regulated items 18.66 203.99 247.87 0.46 21.51 Food excl. fruits & vegetables 31.08 262.98 300.09 0.30 14.11 Retail items 14.48 175.77 205.91 0.05 17.15 Paid services 5.87 214.20 255.51 0.00 19.29 Other services 23.00 152.50 169.45 0.00 11.11 Core CPI 74.43 208.03 237.88 0.17 14.35 Food and beverages Selective aggregates Fruits & vegetables 3/ 1/ Source: CAPMAS and CBE calculations 2/ Based on 2008/2009 Household Expenditure Survey 3/ Excluding pulses, processed vegetables and dried fruits 6