The current inflationary wave in Egypt has driven confidence levels among non-oil businesses to their lowest point since 2012, according to the November report by S&P Global, which analyzes the monthly performance of the Purchasing Managers’ Index (PMI) and assesses the business outlook in the local market.
The PMI for Egypt’s non-oil private sector rose in November to 48.4 from 47.9 in October, way below the 50-mark which separates growth from contraction. S&P Global noted that expectations were only slightly positive, with the manufacturing and construction sectors slipping into pessimism territory.
Amid a bleak outlook, there was a notable surge in input costs, with firms attributing higher material prices to currency weakness and supplier shortages. While the rate of input price inflation accelerated from October, it remained considerably slower than the peaks observed in late 2022 and early 2023. This heightened cost pressure resulted in a sharp and accelerated increase in average prices charged, marking the swiftest pace of charge inflation since March, stated the report.
“Optimism in the Egyptian non-oil economy is eroding as we approach the end of the year, as economic challenges arising from the Russia-Ukraine war put additional pressure on costs and capacity at businesses. While the resulting downturns in new business and output were not as severe compared to those seen at the start of the year, they are also showing no signs of letting up, stretching a sequence of decline that goes back to late 2021,” according to David Owen, senior economist at S&P Global Market Intelligence.
He added that although CPI inflation eased from September’s record of 38% to 35.8% in October, it was still one of the highest ever.
Recent survey data indicate a significant surge in input costs for companies. Concurrently, output prices experienced the most rapid increase since March, underscoring firms’ inclination to transfer cost pressures to clients despite potential impacts on sales.
Simultaneously, non-oil firms reported a more pronounced escalation in their selling charges, marking the swiftest rise since March. This move aimed to offset higher purchase prices resulting from currency weakness and challenges in input supply. While purchase price inflation saw a slight uptick from October, it remained below the peak observed approximately one year ago
