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Egypt's urban inflation remained almost unchanged at 6.4 per cent in the year to August, but climbed a monthly 1.1 per cent on rising food prices, data from CAPMAS showed. The monthly increase in inflation was driven by a 2.53 per cent acceleration in food prices in July-August. Inflation between June and July was a milder 0.65 per cent. On an annual basis, food prices grew 8.23 per cent in August, slightly up from the 8 per cent yearly growth noted a month earlier. August 2012 coincided with the month of Ramadan, when higher consumption pushes up food prices. A note from investment bank Beltone Financial, however, attributed the relatively low annual inflation figure to a "favourable base effect." The Cairo-based bank predicts rises in inflation for the coming month both on annual and monthly bases.
Increased consumption, driven by the start of the new school year in September, will drive prices up on a monthly basis, Beltone says, while unfavourable base effects will drive it on annual basis. It also expects inflation to grow steadily for the rest of 2012. "Inflation should start picking up again steadily until year-end as funds start flowing into Egypt and consumer confidence picks up," Beltone said in a Monday note. The slowdown in money supply growth in July 2012 also indicates a weakening economic activity, Beltone said. Egypt's M2 money supply rose 8 per cent in the year to the end of July, slower than the 8.4 per cent seen in June. Beltone, however, expects money supply to recover by the end of 2012, in line with a possible economic revival.
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