CAIRO - Egypt's annual urban consumer price inflation decreased to 3.4% in August from 4.2% in July, the country's statistics agency CAPMAS said on Thursday, its lowest in a little over a year.

The fall was largely in line with analysts' expectations and was driven mainly by decreasing food costs which translated into a 0.2% month-on-month fall in prices.

"The reported inflation data continues to reinforce our view of a significant slowdown in seasonal demand-pull factors (amid the pandemic) which is also met with increased local supplies," Naeem Brokerage said in a research note.

The coronavirus pandemic hit Egypt's economy hard; tourism has collapsed, the price of gas has plummeted, and worker remittances have come under threat with the decline of oil revenues in Gulf Arab states, where many Egyptians are employed.

"The (inflation) numbers are less than we expected... there is a large decline in the prices of fruits and vegetables and that is the main reason but we don't have any details on the cause of this decline," said Radwa El-Swaify, head of research at Pharos Securities Brokerage.

Core inflation, which strips out volatile items such as food, increased to 0.8% in August from 0.7% in July, data from the central bank showed. 

The country's central bank has targeted an inflation rate of 9% plus or minus 3 and August's headline rate falls well below that mark.

(Reporting by Nadine Awadalla and Ehab Farouk; Editing by Toby Chopra and Nick Zieminski) ((Nadine.Awadalla@thomsonreuters.com;))