CAIRO, Feb 5 (Reuters) – Egypt’s contraction in non-oil private sector activity entered its 26th straight month as high inflation and continued shortages of foreign currency weighed on business, a survey shows. published on Sunday.
The S&P Global Egypt Purchasing Managers’ Index (PMI) slipped to 45.5 in January from 47.2 in December, well below the 50.0 threshold that marks growth in activity.
“The Egyptian non-oil economy suffered a sharp contraction in operating conditions in January as the depreciation of the pound led to a rapid acceleration in price pressures,” S&P Global said.
The PMI sub-index for overall input prices rose to 72.3 from 65.0 in December and that for purchase prices rose to 72.7, its highest level since the months after the Egypt devalued its currency by half after an earlier agreement with the IMF in 2016. The under-index buy price was at 64.3 in December.
“About half of all companies surveyed have seen their purchasing costs increase since the end of last year, leading to a robust and faster increase in overall spending,” S&P Global said.
See 2 more stories
Headline inflation in Egypt hit a five-year high of 21.3% in December, the national statistics body reported last month.
Rising inflationary pressures and the impact on demand led to a sharp contraction in output across the non-oil sector in January, S&P Global said.
“Some companies added that import restrictions have led to further supply shortages, which have hampered activity and contributed to a sustained increase in backlogs.”
The production sub-index slipped to 42.3 in January from 44.8 in December and that of new orders to 42.6 from 45.5.
Egypt is still short of foreign exchange despite the Egyptian pound depreciating nearly 50% since March and signing a new $3 billion bailout package with the International Monetary Fund in December.
“The shortage of dollars has significantly worsened Egypt’s economic challenges in 2022 and is likely to remain a major problem this year,” said David Owen, economist at S&P Global.
“Thus, the trade forecast for the next 12 months has fallen to its third lowest level on record, as companies predict that supply and price issues will further hamper demand.”
The future production expectations sub-index deteriorated to 53.1 from December.
Reporting by Patrick Werr; Editing by Toby Chopra
Our standards: The Thomson Reuters Trust Principles.