Egypt non-oil activity shrinks for 29th consecutive month

Reuters/Mohamed Abd El Ghany

Egypt’s non-oil private sector activity shrank for the 29th month in a row in April as continuing import and currency restrictions and surging prices caused business confidence to hit an all-time low, a survey showed on Wednesday.

The S&P Global Egypt Purchasing Managers’ Index (PMI) improved to 47.3 in April from 46.7 in March, but remained well below the 50.0 threshold that marks growth in activity.

“Import controls and high prices overall continued to weigh on inventories, while sustained economic weakness led to the most downbeat outlook in the survey’s history,” S&P Global said.

Egypt has not allowed its currency to move against the dollar despite pledging to do so in a $3 billion support package with the International Monetary Fund (IMF) signed in December, and the promised sale of billions of dollars worth of state assets has stalled. In the meantime, prices continue to rise.

Headline inflation climbed to a near all-time high of 32.7 percent in March from 31.9 percent in February, the state statistics organisation reported, while core inflation inched down to 39.5 percent after jumping to a record 40.26 percent in February.

The PMI’s sub-index for overall input prices decreased to 58.7 from March’s 62.8, and that for purchase prices fell to 59.9 from 64.3.

“The findings suggest that headline inflation in Egypt should begin to soften over the coming months after hitting a near six-year high of 32.7 percent in March, which will help to ease the cost-of-living crisis,” S&P Global economist David Owen said.

“According to surveyed businesses, weak client demand linked to high inflation continued to play a key part in dampening sales,” S&P Global said. “Restrictions on imported goods were also still cited by companies as an inhibitor to capacity levels.”

The new orders sub-index strengthened to 45.2 from 44.3 in March, while that for output rose to 45.4 from 44.9.

“While manufacturing, wholesale and retail and services recorded declines in output and new work, the construction industry registered growth for the first time in ten months,” S&P Global said.

The sub-index for future output expectations weakened to an all-time low of 51.4 from 54.2 in March.

“Businesses noted that weak demand both domestically and abroad, and high price levels, meant that the path for future activity was still highly uncertain,” S&P wrote.