Egypt PMI for non-oil sector drops to 8-month low in December: S&P

Ahram Online , Monday 6 Jan 2025

Egypt's Purchasing Managers' Index (PMI) for the non-oil sector dropped to an eight-month low of 48.1 points in December, S&P Global said on Monday.

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File Photo: Tailors sewing at the Marie Louis textile clothing and textile factory in the 10th of Ramadan city, about 60 kms north of Cairo. AFP

 

This decline followed an increase in November, when the PMI reached 49.2 points, up from 49 in October.

In August, the PMI rose above the neutral 50-point mark for the first time since November 2020, reaching 50.4 points.

 

Source: S&P Global PMI.

 

The December decline in PMI was attributed to a sharp reduction in new order volumes, which saw the steepest drop in eight months.

Companies linked this weaker demand to challenging client economic conditions and rising price pressures.

Sub-sector data revealed that the downturn in private sector activity was particularly pronounced in the construction and wholesale & retail sectors.

In contrast, the service economy remained relatively stable, as this sector saw a more consistent level of new business than others.

Inflationary pressures
 

The depreciation of the Egyptian pound against the US dollar increased inflationary pressures in December. 

According to the Central Bank of Egypt (CBE), the Egyptian pound exchange rate increased by 1.84 percent on 19 December, reaching EGP 50.98/$1, compared to EGP 50.06/$1 on 5 December.

On 6 March 2024, the CBE applied the fourth wave of fair local currency pricing, raising the dollar exchange rate from EGP 30.9 to EGP 49.56.

In November, Prime Minister Mostafa Madbouly stated that since Egypt implemented a flexible exchange rate in March, the dollar's value has fluctuated by four to five percent, ranging between EGP 47 and EGP 49 per dollar.

He also said similar fluctuations are expected in the coming months, depending on the demand for the dollar.

Egypt's annual headline inflation reached 25 percent in November 2024, while the annual core inflation rate recorded 23.7 percent.

Materials costs surged, driving the fastest rate of input price inflation in three months.

Despite this, companies struggling to boost sales raised output prices at the slowest pace since May.

 

 

Worries about escalating purchasing costs led some companies to reduce their stock levels, resulting in a decline in total inventories for the first time in six months.

While purchases of new inputs rose, this was mainly observed in the manufacturing and services sectors.

Employment decline
 

According to survey participants, non-oil businesses reduced their workforce for the second consecutive month, primarily by not replacing departing staff.

This measure offset some mentions of capacity improvements, although the overall drop in payroll numbers was modest.

Efforts to reduce the workforce coincided with a faster increase in salaries.

Following a 16-month low in November, staff pay inflation rose to a four-month high, with companies mainly attributing the increase to cost-of-living challenges.

Outlook for PMI
 

Non-oil companies were more optimistic about future business activity at the end of 2024, as sentiment rebounded from a near-record low in November.

Many companies expressed hopes for improving domestic and geopolitical conditions in 2025. However, inflationary concerns contributed to some pessimism among certain firms.

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