Egypt’s Purchasing Managers’ Index (PMI) for the non-oil private sector hit the second lowest level since June 2020 at 45.4 in November from 47.7 in October as the country still faces inflationary pressure amid weakening pound said S&P Global.
According to S&P Global report released on Monday, the new low extends the current sub-50 sequence to two years, with readings below 50.0 indicating a contraction.
“Egyptian firms faced an immediate hit to demand from a rapid depreciation of the pound since late October, with the November PMI results signaling the worst drops in output and new orders since May 2020,” David Owen, an economist at S&P Global Market Intelligence, said in the report.
Owen said the pound’s depreciation against the U.S. dollar led to a marked increase in prices paid for raw materials, which have already been exacerbated by import restrictions since early 2022.
According to S&P Global, Egypt’s purchase price inflation recorded a 52-month high, leading 42 percent of surveyed firms to report an increase in total input costs over the month.
While new orders continued to decrease rapidly for firms, Egypt witnessed employment levels still expanding for the fourth time in five months as business confidence recovered slightly from October’s series low.
However, S&P said the rate of decline in new orders deepened in November, amid reports of spending cuts at customers due to rapid inflation and elevated interest rates.
“The latest downturn also came in the midst of an emergency 2 percent hike in interest rates, amid continued efforts to bring inflation down from its current four-year high of 16.2 percent,” added Owen.
While the latest FX move signals a further rise in inflation in November, he stated that it is hoped that slowing demand and falling commodity prices will start to alleviate price pressures in the medium- to long-term.
Looking ahead, the report said the Egyptian firms were slightly more optimistic about future output in November, albeit following a series record low in October. However, it further added that concerns about high inflation, rising interest rates, currency weakness and a global economic slowdown remained dampeners on sentiment.
