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High inflation, EGP devaluation weigh on Egypt’s non-oil private sector in November

High inflation, EGP devaluation weigh on Egypt’s non-oil private sector in November

Arab Finance: Egyptian non-oil private sector businesses signaled a downturn in operating conditions in November, with inflationary pressures and devaluation of the Egyptian pound weighing on both business activity and demand, according to the S&P Global Egypt PMI™ release issued on December 5th.

The headline seasonally-adjusted IHS Markit Egypt Purchasing Managers’ Index (PMI) fell to 45.4 in November from 47.7 in October, marking the second-lowest reading since June 2020, the data showed.

New business activities dropped to the lowest degree since May 2020 in November, while export sales fell amid contracting global economic conditions, the survey added.

Along with the downturn in business activities, panelists reported increases in costs at a fast pace and a decline in new orders, which forced them to cut output, according to the survey.

New orders decreased in November due to persisting inflation and higher interest rates, while output hit the lowest rate since the initial Covid-19 lockdown in May 2020 due to the depreciation of the Egyptian pound.

"The pound's depreciation against the US dollar led to a marked increase in prices paid for raw materials, which have already been exacerbated by import restrictions since early 2022. Purchase price inflation hit a 52-month high, leading 42% of surveyed firms to report a rise in total input costs over the month,” Economist at S&P Global Market Intelligence David Owen commented.

"The latest downturn also came in the midst of an emergency 2% hike in interest rates, amid continued efforts to bring inflation down from its current four-year high of 16.2%. While the latest FX move signals a further rise in inflation in November, it is hoped that slowing demand and falling commodity prices will start to alleviate price pressures in the medium- to long-term,” Owen added.

On the other hand, employment levels grew for the fourth time in five months, with business confidence recovering slightly as compared to October.

As per the survey, Egyptian firms were more optimistic to some extent about future output in November, despite the low records until October.

However, firms remained concerned about persisting inflation, rising interest rates, weak currency, and a global economic slowdown.

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