Egypt’s non-oil private sector activity decreased in October due to rising costs affecting new orders
Egypt’s non-oil private sector kept shrinking in October. Rising costs and higher prices made it harder for businesses to get new orders and slowed down overall activity, according to the latest report from S&P Global’s Purchasing Managers’ Index (PMI) released on Tuesday.
Non-oil sector
The main PMI, a measure of the health of the non-oil private sector, went up slightly to 49 in October from 48.8 in September. Although it rose, the score was still below 50 for the second month in a row, showing the sector continues to decline.
“The non-oil private sector remained weak in October, with businesses saying that rising costs have prevented growth,” said David Owen, senior economist at S&P Global Market Intelligence.
“This downturn was seen across all areas surveyed, especially in construction, where higher material costs reduced activity,” he added.
“However, with a PMI of 49, Egypt’s non-oil economy is not far from growth, and the recent easing of cost pressures brings hope that challenges may lessen.”
In October, the cost of materials and utilities increased, leading businesses to raise their prices. This impact was worsened by the strong US dollar, which made imports more expensive for Egyptian companies.
Firms reported that rising prices have slowed down new orders, as clients are reluctant to buy due to the higher costs.
Small Improvement
Even with current challenges, some parts of the PMI showed small gains in the sector. Companies reported a slight increase in stock levels and hiring for October, marking the fourth month in a row of job growth.
Hiring even picked up to its fastest rate since May, with companies building up inventory to handle expected cost increases.
Input costs grew at a slower pace than in September, which had seen a six-month high, suggesting that price pressures may ease in the coming months. Also, total input purchases dropped for the first time in three months, helping to reduce some supply chain pressure.
However, the sector is still weighed down by weak market demand. Construction companies, in particular, experienced a notable drop in activity and sales, showing how widespread the slowdown is across Egypt’s non-oil private sector.
On top of that, business confidence remains low, with the confidence index hitting one of its lowest levels, as companies still face uncertainty around costs and market demand.
Tangent
On Sunday, the head of the International Monetary Fund (IMF), Kristalina Georgieva, arrived in Egypt to check on the progress of the country’s $8 billion loan program. She will look at recent economic changes Egypt has made and discuss other ways the IMF can support the country as it deals with economic problems.
An IMF team will visit Cairo on Tuesday to review Egypt’s reform plans. If things go well, this could lead to over $1.2 billion in new funding for Egypt.
Published: 5th November 2024
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