A man working in a local chocolate factory. Reuters
The decrease in the PMI reading in September came after achieving stability in August at 49.2 points.
September's PMI reading reflects that Egypt's non-oil private sector is generally declining, as a reading below 50 points indicates that the sector is heading towards contraction.
Additionally, private sector productivity in Egypt fell sharply and rapidly in September compared to August due to supply chain obstacles, higher inflation rates in input costs, and difficulties acquiring raw materials.
"Pressure on operating capacity led to the sharpest increase in backlogs of work ever recorded by the survey since it began in 2011," S&P said.
The Egyptian non-oil private sector currently faces various challenges, including fears that prices will continue to rise and ongoing supply constraints, S&P highlighted in a report.
According to the report, total business activity decreased at a sharp and accelerated rate at the end of the third quarter (July-September) of 2023, due to price pressures, and a lack of confidence that caused weak demand.
"New work intakes dropped at the fastest rate since May, although the decline remained soft compared to those seen at the beginning of the year," the report added.
Egypt’s headline annual inflation rate rose to the highest level ever in August at 39.7 percent, up from 38.2 percent a month before, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).
Egyptian firms were unable to fulfil customers' orders during September because of the high-inflationary environment and lack of raw material supplies, noted David Owen, senior economist at S&P Global.
"Wage inflation ticked up to a seven-month high as some companies opted to raise staff salaries to help employees facing heightened living costs," read the report.
Moreover, the weak exchange rate led to a sharp rise in the costs of production inputs, which in turn led to a strong increase in selling prices.
The US dollar currently is valued at a buy rate of EGP 30.83 and a sell rate of EGP 30.96.
Within the first ten months of 2022, Egypt’s total non-oil exports reached $30.4 billion, increasing 12 percent from $27.1 billion in the same period of 2021, according to the General Organization for Export and Import Control (GOEIC).
Furthermore, the CBE said that this vital sector acquired the lion’s share of net foreign direct investment inflows during the first quarter of FY2022/23.