Egypt’s latest inflation figures announced on Sunday came in below expectations.

Monthly headline CPI (consumer price index) inflation, published by the Central Agency for Public Mobilisation and Statistics (CAPMAS), recorded 1.1 per cent in October compared with 2.1 per cent in September. On an annual basis, inflation recorded 26.5 per cent in October, just a notch higher than the 26.4 per cent recorded in September.

Meanwhile core inflation, computed by the Central Bank of Egypt (CBE), recorded 24.4 per cent in October compared with 25 per cent in September. On a monthly basis, core inflation registered 1.3 per cent, up 0.3 per cent from the month before.

Mohamed Hassan, managing director of specialised investments at Alpha Financial Investments Management, said the low figures were driven by the base year effect which compares current figures to inflation during the same time the previous year. Inflation stood at 35.8 per cent in October 2023.

According to Hassan, prices have been relatively stable in recent months, especially with a stable dollar rate that is reflected positively in the inflation figures.

The base year effect will continue to reflect positively on the inflation figures going forward, he added. Moreover, he believes that the election of Donald Trump as the next US president, who is on better terms with Russia’s President Vladimir Putin than outgoing US President Joe Biden, could help stabilise the war in Ukraine.

That would reflect positively on Russian and Ukrainian wheat exports and therefore on global food inflation in 2025, a move that Egypt stands to benefit from as the world’s largest wheat importer.

However, economic analyst Mona Bedair believes the new inflation figures do not fully reflect the dynamics on the ground. For example, the increase in fuel prices does not seem to have been factored in, she said. Fuel prices were hiked in October as part of the government’s efforts to trim expenditure by cutting subsidies.

The October inflation figures do not reflect increases in education-related expenses either. Bedair explained that in previous years increases in the cost of education made themselves felt in October, but this did not happen this year.

According to Bedair, last year CAPMAS announced that it was postponing factoring in education increases to February. This year it seems to have done the same thing, though this was not announced officially, she noted.

The only figure that saw an upward movement on a monthly level was healthcare, which witnessed the third highest increase in inflation of the year. This has been increasing since the beginning of the year, largely as a result of the increased cost of pharmaceuticals, but Bedair said it should slow in the coming months.

Pharmaceuticals prices have increased by up to 40 per cent since the beginning of the year as manufacturers have factored in the devaluation of the pound.

Bedair expects the full effect of the fuel increases to make itself felt in November. She said various businesses, such as bakeries, had not increased their prices immediately following the fuel price hike and had postponed any increase in order not to affect consumer spending.

Nonetheless, she expected a 70 per cent chance of inflation dropping in November because despite increases caused by fuel hikes, these could be offset by stability in other areas.

For example, the prices of fruit and vegetables generally stabilise in November and December because there is greater supply. This is also a season for discounts, which means the prices of items such as clothing drop and accordingly affect the inflation index.

Another element that will register in November will be the increase in the price of cigarettes. Last week, cigarette maker the Eastern Company, the country’s leading tobacco producer, raised prices by an average of 12 per cent.

This was the fourth hike this year, but Bedair believes the effect on cigarette prices will still be minimal given their weighting in the CPI basket.

* A version of this article appears in print in the 14 November, 2024 edition of Al-Ahram Weekly