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Core inflation rate jumps to 4.64 per cent - Daily News Egypt

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Core inflation rate jumps to 4.64 per cent

The core CPI comprises 55 items divided into 4 categories: food, retail, paid services and other services


Following the consumer price index (CPI) published by the Central Agency for Public Mobilization and Statistics (CAPMAS) on 10 November 2012, the Central Bank of Egypt (CBE) has issued the core inflation notes for October 2012.

The consumer price index is considered the headline inflation rate, the raw inflation figure reported monthly by CAPMAS. This calculates the cost to purchase a fixed basket of goods as a way of measuring the inflation level in the country.

On the other hand, core inflation strips volatile elements including seasonal changes, which cause distortions to the headline figure. Despite the media attention given to headline inflation, the core inflation rate is the most accurate and consistent measure.

The CBE report mentions that the core CPI increased by 1.18 per cent in October compared to a decline of 0.31 per cent in September, while the headline CPI increased by 0.79 per cent in October compared to 1.20 per cent in September.

October’s core CPI rate significantly exceeded the average monthly pace of 0.33 per cent recorded between January and September 2012. However, October’s headline CPI is closer to the average 0.55 per cent rate over the same period.

Food prices contributed 0.60 percentage points to the monthly core inflation rate. Price changes in paid services registered in October contributed another 0.30 percentage points and price changes in other services added 0.20 percentage points to the monthly core inflation figure.

The increase in monthly headline inflation was justified by a sharp rise of 61.61 per cent in the price of butane gas cylinders on the back of supply shortages. Added to this was the annual adjustment in school tuition of 12.65 per cent that takes place in October every year. The price of butane gas cylinders witnessed erratic movements since early 2012 driven by bottlenecks in the distribution channels. Monthly prices increased four times this year by a cumulative 182.86 per cent while declining four times by a cumulative 83.15 per cent, according to the CBE report.

The annual rate of core inflation increased to 4.64 per cent in October from 3.84 per cent in September, while the annual rate of headline CPI inched up to 6.70 per cent in October compared to 6.22 per cent in September.

Subsidised items such as butane gas cylinders and seasonal items like fruits and vegetables are kept out of the core CPI index.

The core CPI comprises 55 items divided into 4 categories: food, retail, paid services and other services. Under food is classified bread, cereals, meat, poultry and beverages.  Retail includes clothing, fabrics, footwear, furniture, carpets and household appliances. The paid services group includes tailoring, laundry, shoe repair, household maintenance and gardening services. The final category of other services includes rental, hospital, transportation, mobile and internet services.

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