"Despite ticking up to the highest since February, the headline index was still below its long-run average and indicated another solid decline in operating conditions", according to S&P Global report on Egypt.
Meanwhile, the report pointed out to a sustained decrease in new business inflows across the non-oil private sector, which dropped significantly to the least extent in eight months.
It also noted that the sector’s companies experienced a contraction in new orders in October that was driven by the elevated inflation and the subsequent fall in client spending, including customers from foreign markets.
“As a result, overall activity decreased at a sharp pace in October, with the downturn broadly spread across the whole of the non-oil economy. Sector data showed that output decreased in manufacturing, construction, wholesale & retail and services, with new business also falling in each category”, read the report.
Rising Purchasing Costs
The report’s survey data also indicated severe cost pressures in recent months, reaching a near four-year high in June.
In this respect, the report said that although cost pressure softened for the third time in four months, the rate of input cost inflation was still sharp and above the series trend in October, with nearly a quarter of respondents seeing prices rise over the month often due to higher purchasing costs.
“In turn, rising purchase prices were commonly linked to a lack of raw material availability and a further deterioration in the exchange rate against the US dollar which pushed input costs higher," the report explained.
Furthermore, the report said, previous restrictions that the CBE has imposed on the country’s imports added to economic disruption in October.
It added that import suspensions in the wake of the Russia-Ukraine meant that a number of businesses again struggled to acquire relevant inputs.
"The shortfall contributed to the drop in output and another marked contraction in purchasing activity, although to a lesser extent than in September. Firms noted that higher prices for raw materials and a lack of new orders also weighed on buying activity," said the report.
Owen, Economist at S&P Global Market Intelligence, said that Egyptian non-oil activity sunk lower in October according to the latest PMI data, as inflation continued to weigh on consumer sales and business spending.
“Despite the drop in sales easing to the weakest since February, firms signalled that the deteriorating local and global economic environment was likely to hurt the non-oil sector even further, with business optimism regarding the next 12 months sliding to its lowest in the series history," Owen explained.
He added that Egypt remains heavily impacted by the war in Ukraine, particularly in the tourism sector, and that industries have been constricted by the government's import ban, in place since March, in a bid to conserve US dollar reserves.
Meanwhile, several businesses reported that import restrictions had pushed material prices even higher, adding to upticks in energy and food commodity prices recorded since the war began, according to Owen.
Owen explained that despite hikes in costs and purchasing "only a proportion of cost rises are being passed through to consumers".
He added that " only 5 percent of respondents raised their charges in October, compared to 24 percent that saw a concurrent rise in costs - suggesting that many firms are being forced to shoulder the burden of higher expenses as the demand outlook weakens”.
During Egypt’s Economic Conference, held in October, Egypt’s government asserted its tendency to increase the private sector's share in the country’s GDP and economic activity to 65 percent, up from the current 30 percent.
The government also said that the State Ownership Policy document, which charts a roadmap for a greater role to be played by the private sector in the Egyptian economy, is about to be finalized after which it will be brought up for discussion by the community for three months before coming into effect in 2023.
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