Egypt’s non-oil private sector conditions remained weak in December due to slowed down demand that led to sharper decline in activity and new orders, according to the S&P Global Egypt Purchasing Managers’ Index™’s (PMI™) survey posted on January 4th.

However, the operating conditions slightly rose as the headline seasonally adjusted S&P Global Egypt PMI recorded 48.5 in December from 48.4 in November, which is still below the 50-point threshold, the data showed.

The survey also highlighted that the Egyptian pound weakness and the continuous supply constraints were significant factors in this sharp decline, causing businesses to experience a sharp increase in input costs as well as a decrease in consumer spending.

On the bright side, employment at non-oil companies increased in December for the first time since September, with projections for future output showing a slight improvement from the record low reached in November.

To increase capacity, businesses hired more people, in part due to increases in outstanding business in each of the previous five months. As a result, increased employment enabled businesses to maintain relatively constant backlogs of work in December.

The data also show a deteriorating decline in new order volumes in December, which respondents frequently attributed to rising inflation and currency issues.

The pace of loss in new orders was the steepest since May, with businesses in the wholesale and retail sector reporting a particularly high drop.

"The Egypt non-oil economy rounded off the year with the fastest drop in sales for seven months over December, suggesting that the drag on demand conditions from inflation has not lost any power,” Senior Economist at S&P Global Market Intelligence David Owen said.

“As highlighted by surveyed firms, inflationary pressures are still widely driven by the economic challenges originating from the Russia-Ukraine war, including a marked depreciation of the pound against the US dollar leading to an uplift in buying costs," Owen added.

As a result, non-oil businesses further reduced their output in December, and the rate of contraction accelerated compared to the previous month.

Another decline in input purchases resulted from lower output requirements, albeit at a slower rate than in the previous two years.

 

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