Arab Finance: Egypt’s non-oil private sector contracted for a 10th consecutive month in October, with the S&P Global Egypt Purchasing Managers’ Index (PMI) holding at 47.2 as output and new orders fell more sharply.
The seasonally adjusted index remained below its long-run average of 48.2. It combines measures of output, new orders, employment, supplier delivery times and purchasing inventories to track operating conditions across the sector.
Both output and new business recorded their steepest declines in four months. Surveyed companies cited subdued markets, rising prices and weaker purchasing power as factors behind falling customer demand. The Middle East conflict also continued to affect demand, with businesses reporting softer conditions in external markets and increasing delays among suppliers.
Alongside the decline in activity, companies faced a sharp pickup in cost pressures. Input cost inflation reached its highest rate since May, driven by faster increases in purchasing prices and staff expenses.
Businesses pointed to more expensive imported inputs, energy and shipping, as well as a weaker exchange rate against the US dollar. Salary adjustments to help employees cope with higher living costs contributed to a quicker rise in staff expenses than in September. Companies passed higher operating costs on to customers, raising selling prices at the fastest pace since June.
Inflation concerns also shaped inventory decisions. Businesses reduced input purchases sharply but accumulated stocks for the first time since June as they sought to build buffers against further price pressures.
At the same time, supply chains came under greater strain. Delivery times lengthened by the most since June, with maritime disruptions, shortages of materials and slower customs procedures holding up supplies.
Employment declined modestly after two consecutive months of job creation, largely because employees left voluntarily. Outstanding work also decreased slightly, marking the first reduction in backlogs since January.
Looking ahead, business confidence dropped to a seven-month low, leaving firms only slightly optimistic about output over the coming year. Hopes for better economic and market conditions were tempered by concerns about wars, elevated inflation and disruption to supply chains.
Despite the continued contraction signaled by the PMI, its historical relationship with Egyptian gross domestic product (GDP) suggests the latest reading is consistent with annual growth in domestic output of approximately 4.3%.
