2023-11-05 05:37:30
The performance of the non-oil private sector in Egypt slowed last October in light of a “sharp deterioration” in business conditions.
The reading of the Purchasing Managers’ Index for Egypt, issued by S&P Global on Sunday – which measures the performance of the non-oil private sector – decreased during the month of October to 47.9 points, compared to 48.7 points in the previous month. September.
This is the lowest reading for the index in five months.
David Owen, a senior economist at S&P Global, said in the PMI report that the index reading during October indicates a “sharp deterioration in non-oil business conditions in five months.”
Egypt has been facing an economic crisis since the Russian-Ukrainian war, with a severe shortage of dollar liquidity and a rise in the inflation rate to record levels in light of the rise of the dollar and the decline in the value of the pound, in a country that relies heavily on imports.
Egypt agreed with the International Monetary Fund on a financing program for a $3 billion loan last December, but it obtained only one tranche from it.
What are the reasons for a low indicator reading?
New purchase orders in Egypt’s non-oil private sector fell further into the negative range at the beginning of the fourth quarter of the year, according to the Purchasing Managers’ Index report.
Demand continued to deteriorate due to rising prices, a weak currency and supply problems.
Output was the only subcomponent with an upward impact on the PMI in October, recording a slower contraction, but still a strong contraction.
In addition to the decline in sales, non-oil private sector companies indicated that ongoing material shortages and price pressures prompted them to reduce business activity.
The weakness in commercial activity was concentrated in the manufacturing, construction, wholesale and retail sectors, while the services sector bucked this trend and achieved a slight expansion.
During October, the decline in the number of employees in non-oil-producing companies was renewed, following the number of jobs increased in each of the previous two months. The decline in employment was modest, but the fastest since February.
The companies said the rapid decline in sales prompted them to lay off workers and leave jobs vacant.
In October, companies reported a slight decline in their inventory levels for the first time in three months, following they had previously increased inventory in light of fears of rising prices for production inputs.
This came in conjunction with another sharp increase in input costs during the month of October, driven by rising material prices and a weak local currency, as well as a lack of supply, which was a major factor behind the rise in prices.
Despite this deterioration in business conditions, expectations for activity for next year improved to their highest levels in 2023 during October, with companies somewhat optimistic regarding a recovery in economic conditions.
(Prepared by: Maryam Abdel Ghani, contact [email protected])
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