Egypt Private Sector Activity Continues to Shrink in December

By Ahmad El-Assasy

According to a survey released on Wednesday, non-oil private sector activity in Egypt shrank in December for the 25th consecutive month due to increased inflation, a depreciating currency, and ongoing import restrictions.

The S&P Global Egypt Purchasing Managers' Index (PMI) increased from 45.4 in November to 47.2 in December, but it remained below the 50.0 mark, which denotes activity expansion.

The sub-index for output increased from 40.8 in November to 44.8, and the sub-index for new orders increased from 41.4 to 45.5.

“According to survey panelists, lower activity generally reflected weak demand conditions, as rising prices led customers to make additional cuts to spending,” S&P Global said.

Higher material costs and ongoing import restrictions contributed to the contraction, it was claimed.

Despite a 14.5% depreciation of the Egyptian pound in October and the announcement of a $3 billion bailout package with the International Monetary Fund, Egypt still suffers from a serious lack of foreign money. The import flow for factory and retail inputs has been constrained by the shortfall.

The PMI's sub-index for total input prices dropped from 72.4 in November to 65.0, and the sub-index for purchase prices dropped from 72.4 to 64.3.

According to S&P Global analyst David Owen, "cost worries caused enterprises to reduce headcounts and deplete input inventories in December, leading to an extra rise in backlogs of work."

According to data released last month by the government statistics agency, Egypt's inflation rate increased to a five-year high of 18.7% in November.

Future output expectations' sub-index increased from 55.7 in November to 56.9 in December. The reading was the highest since June.