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Only 4% of firms, just one out of 25, surveyed for Egypt’s purchasing manager’s index (PMI) in October gave a positive outlook for the next 12 months, the lowest recorded level.
As the PMI index grew marginally, reaching 47.7 in October, up from 47.6 last month – anything below 50.0 indicates business conditions are deteriorating – the country remains heavily impacted by the Russia-Ukraine war, the PMI report for the months said.
David Owen, chief economist at S&P Global Market Intelligence said that the deteriorating local and global economic environment is likely to hurt the country’s non-oil sector even further.
He said 5% of survey respondents raised their charges in October even though 24% saw a rise in costs, adding that firms are being forced to shoulder the burden of increasing costs as demand weakens.
The sequence of deteriorating PMI index scores has now continued for just under two years, the report said, and despite ticking up to the highest since February, the headline index was still below its long-run average and indicated another solid decline in operating conditions.
“The fall was accompanied by a sustained decrease in new business inflows, which dropped solidly though to the least extent for eight months,” the report added.
“Firms suffering a contraction in new orders often highlighted rapid inflationary pressures and a subsequent fall in client spending, including customers from foreign markets.”
The report showed overall activity decreased at a sharp pace in October as a result, with the downturn broadly spread across the whole of the non-oil economy, with output decreasing in manufacturing, construction, wholesale and retail and services, with new business also falling in each category.
Anecdotally, ongoing controls on imports added to economic disruption in October, with import suspensions introduced in the wake of the Russia-Ukraine war meaning that a number of businesses again struggled to acquire relevant inputs which contributed to a drop in output.
Higher prices for raw materials and a lack of new orders also weighed on buying activity.
Delivery times
However, there was an indication that suppliers’ delivery times had improved for the first time in a year, which the report suggested was a sign that conditions were stabilising following the impact of the war.
But as output expectations hit a record low, non-oil firms reduced their staffing numbers for the first time since June with some citing layoffs due to deteriorating sales.
Owen said: “Egypt remains heavily impacted by the war in Ukraine, particularly in the tourism sector, as well as industries constricted by the government's import ban in place since March in a bid to conserve US dollar reserves.
“Several businesses reported that import restrictions had pushed material prices even higher, adding to upticks in energy and food commodity prices recorded since the war began.”
(Reporting by Imogen Lillywhite; editing by Daniel Luiz)
