Non-oil business conditions in Egypt declined in December albeit at a softer rate than in the previous months, as business activities continued to slow.

The latest Purchasing Managers’ Index (PMI) reached 47.2 during the month, an improvement on the November figure of 45.4, but still significantly below the threshold for business expansion, which is 50.0.

“The index signaled a solid deterioration in the health of the non-oil sector, albeit one that was less marked than in November,” the S&P Global Egypt report said.

Egypt has seen headline indexes below the 50.0 threshold for 25 months in a row.

Rapid inflation continued to hamper the non-oil economy, according to the report, with further declines in output and new business being reported by companies, but at a slower level than November. 

Panellists surveyed said slower activity reflected weak demand conditions, as rising prices led customers to make additional cuts to spending.

“The downturn in sales was broad-based across the monitored sectors, albeit relatively mild in the service category,” the report added, saying that output levels were also constrained by a sharp drop in purchasing activity in December, which fell for the twelfth successive month and at the strongest rate since June. As a result, firms reduced staffing levels for the second time in three months.

David Owen, economist at S&P Global Market Intelligence, said the Egyptian pound’s depreciation against the US dollar continued to drive input costs higher, although data suggested inflation for December was softer than November’s four-year record. 

“Nonetheless, with last month’s data indicating that firms had shouldered most of the cost burden, output prices continued to rise at a rapid pace at the end of the year as firms passed a greater proportion of their expenses onto clients,” he said.

Work backlogs had also risen due to staff headcounts reducing, he said.

“On a positive note, hopes that inflation will be tamed in 2023 through interest rate hikes and the subsequent slowing of demand meant that firms were more optimistic for activity in the year-ahead, with sentiment climbing higher from October's record low,” he said.

(Reporting by Imogen Lillywhite; editing by Seban Scaria)