Non-oil activity in Egypt shrinks 28th month as inflation soars

Egypt’s non-oil private sector activity shrank for the 28th straight month in March as import and currency restrictions and rising inflation continued to hurt business, a survey showed on Tuesday.

The S&P Global Egypt Purchasing Managers’ Index edged down to 46.7 in March from 46.9 in February, well below the 50.0 threshold that marks growth in activity.

“At 46.7, the headline PMI signaled a further solid deterioration in the performance of non-oil companies, driven by steep falls in activity and new business volumes,” S&P Global economist David Owen said.

Egypt remains short of foreign currency despite the Egyptian pound depreciating by half since March 2022 and its signing of a $3 billion support package with the International Monetary Fund in December.

Headline inflation soared to a five-and-a-half-year high of 31.9 percent in February from 25.8 percent in January, the state statistics organization reported, while core inflation leaped to 40.26 percent.

The PMI’s sub-index for overall input prices inched up to 62.8 from February’s 62.7, and that for purchase prices climbed to 64.3 from 63.9.

“Steep inflationary pressures and a drop in client demand continued to negatively impact non-oil businesses, chiefly through a sharp reduction in new orders,” S&P Global said.

The new orders sub-index fell to 44.3 in March from 44.7 in February, while that for output strengthened to 44.9 from 44.6.

“Output levels fell at a marked rate across the non-oil private sector during March, in part due to ongoing difficulties with accessing key inputs due to import controls and currency restrictions,” S&P Global said.

Inventories and employment levels also decreased, S&P Global economist David Owen said.

The sub-index for future output expectations improved to 54.2 from 52.5 in February, still near an all-time low.

“Despite picking up to a three-month high, the year-ahead outlook for activity was still among the weakest recorded since the series began in early-2012,” S&P wrote.