In its report on Egypt’s non-oil private sector’s condition, IHS noted that ongoing supply disruptions that have made it difficult to obtain a vast array of raw materials and components forced non-oil companies in Egypt to reduce their output levels at the start of the fourth quarter of 2021.
IHS Markit’s PMI is a composite index designed to give a single-figure snapshot of operating conditions in the non-oil private sector’s economy.
“The pace of contraction quickened to the fastest since April and was solid. Additionally, stocks of inputs fell to the greatest extent since June 2020, as firms commented on the need to withdraw from their inventories to support business activity,” the report explained.
Moreover, the sector’s companies experienced a rise in the purchasing prices of raw materials in October; particularly in metals, plastics, packaging, and building materials, according to the report.
It noted that the rate of inflation was the fastest since August 2018, resulting in the sharpest increase in both input costs and output charges over the same time frame.
Furthermore, the report showed that export sales dropped in the sector rapidly in the last 17 months despite an ongoing recovery in local sales, which means that demand conditions remain relatively buoyant.
“There were growing concerns among companies that supply disruption will intensify in the coming months and potentially limit the economic recovery, leading to a substantial fall in output expectations from September’s record high,” said the report.
On the upside, the report pointed out that demand conditions in the non-oil economy remained relatively strong in October; as many companies had continued to report an improvement in sales, particularly in tourism hotspots.
The Central Agency for Public Mobilisation and Statistics (CAPMAS) and the Central Bank of Egypt (CBE) are expected to announce October’s headline, annual, and monthly calculations next week amid expectations that inflation rates will go up.
In September, Egypt’s headline annual inflation reached its all-time high since December 2020, posting eight percent, up from 3.3 percent in the same month of 2020 and 6.4 percent in August 2021, according to CAPMAS.
The headline monthly inflation rate also increased in September by 1.6 percent.
In light of these figures, the CBE’s Monetary Policy Committee decided in September to keep the key interest rates unchanged.
It maintained the overnight deposit rate, overnight lending rate, the rate of the main operation, and the discount rate at 8.25 percent, 9.25 percent, 8.75 percent, and 8.75 respectively.