Egypt’s inflation eases for first time in three months despite oil price shocks

Egypt’s inflation slowed in April for the first time in three months, defying expectations of sustained price pressures from the Middle East conflict that has driven up fuel costs and weakened the currency.

Data released on Wednesday by the Central Agency for Public Mobilization and Statistics (CAPMAS) showed that annual urban consumer inflation eased to 14.9 percent from 15.2 percent in March.

The moderation comes despite persistent inflationary pressures linked to the conflict involving Iran, which has pushed up global energy prices, raised transport and food costs, and added strain on the Arab’s nation currency.

Food and beverage prices—the largest component of the inflation basket—rose 6.7 percent year-on-year, the fastest pace in ten months, compared with 5.8 percent in March.

On a monthly basis, consumer prices increased by 1.1 percent last month, slowing from a 3.2 percent surge in the previous month. Food and beverage prices, however, declined by 0.7 percent month-on-month.

Analysts attributed ongoing price pressures to higher electricity tariffs introduced at the start of the month, currency weakness, and rising commodity prices, particularly poultry.

Annual inflation has fallen sharply from a record 38 percent in September 2023, supported in part by an $8 billion financial programme agreed with the International Monetary Fund in March 2024. However, risks to the outlook remain tilted to the upside. Inflation could accelerate in May following an increase in natural gas prices for several energy-intensive industries announced on May 3.

Business activity weakens

Separate data from S&P Global showed that business conditions in Africa’s second biggest economy deteriorated further in April, underscoring the strain on the broader economy.

The Purchasing Managers’ Index (PMI) fell to 46.6 from 48.0 in March, marking the weakest reading since January 2023 and signalling a continued contraction in non-oil private sector activity.

The decline reflects weakening demand, supply chain disruptions and intensifying cost pressures tied to the Middle East crisis. Input cost inflation climbed to a more than three-year high, prompting firms to raise selling prices and pointing to renewed upside risks for headline inflation.

“Output and new orders declined sharply in April, pointing to a slowdown in GDP growth at the start of the second quarter,” said David Owen, senior economist at S&P Global Market Intelligence. “Companies consequently exercised greater caution towards purchasing and employment decisions, whilst presenting a subdued outlook for the year ahead.”