CAIRO - A contraction in Egyptian non-oil private sector activity entered its 26th straight month as high inflation and a continued shortage of foreign currency weighed on business, a survey showed on Sunday.

The S&P Global Egypt Purchasing Managers' Index (PMI) slipped to 45.5 in January from 47.2 in December, well below the 50.0 threshold that marks growth in activity.

"The Egyptian non-oil economy suffered a sharp contraction in operating conditions in January, as a depreciation of the pound drove a rapid acceleration in price pressures," S&P Global said.

The PMI's sub-index for overall input prices climbed to 72.3 from December's 65.0 and that for purchase prices rose to 72.7, its highest reading since the months after Egypt devalued its currency by half after an earlier IMF agreement in 2016. The purchase price sub-index was at 64.3 in December.

"Roughly half of all surveyed firms saw their purchasing costs increase since the end of last year, leading to a robust and quicker rise in overall expenses," S&P Global said.

Headline inflation in Egypt surged to a five-year high of 21.3% in December, the state statistics organisation reported last month.

The increased inflationary pressures and the impact on demand led to a sharp contraction in output across the non-oil sector in January, S&P Global said.

"Some firms added that import restrictions led to further supply shortfalls, which hindered activity and contributed to a sustained rise in backlogs of work."

The sub-index for output slid to 42.3 in January from 44.8 in December and that for new orders to 42.6 from 45.5.

Egypt is still short of foreign currency despite the Egyptian pound depreciating by nearly 50% since March and its signing of a new $3 billion rescue package with the International Monetary Fund in December.

"The dollar shortage added significantly to Egypt's economic challenges in 2022 and will likely remain a major problem this year," said S&P Global economist David Owen."

"As such, business forecasts for the coming 12 months fell to their third-lowest on record, as firms predict supply and price-related issues to hamper demand further."

The sub-index for future output expectations deteriorated to 53.1 from in December.

(Reporting by Patrick Werr; Editing by Toby Chopra)