Business activity in Egypt declines as inflation soars

The decline in business conditions was led by a reduction in output levels in November, IHS Markit said in its PMI survey

  
Nile river at dusk. Image used for illustrative purpose.

Nile river at dusk. Image used for illustrative purpose.

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The increasing cost of running businesses continues to wreck Egypt's non-oil economy.

While selling prices are high and demand plunged in November, new businesses fell at the quickest pace for six months, resulting in lower output and renewed cuts in jobs as well as purchasing, according to a latest business survey.

The IHS Markit Egypt Purchasing Managers’ Index (PMI) was unchanged at 48.7 in November, indicating a moderate deterioration overall. The index has now posted below the 50.0 neutral mark for 12 successive months.

The decline in business conditions was led by a reduction in output levels in November. According to the IHS Markit survey, a declining demand from clients and slowdowns due to global supply chain issues were often behind the downturn.

New order volumes fell for the third consecutive month. Higher selling prices often deterred customer spending in the domestic market. Selling charges were raised sharply midway through the fourth quarter, with the rate of inflation dipping only slightly from October's 38-month high, the survey noted. 

David Owen, Economist at IHS Markit, said: "Inflationary pressures and supply shortages were again the most prominent depressors of Egypt's non-oil economy in November. Output was down for the third month in a row, matched by a third consecutive decline in new business as higher selling prices deterred client spending in the domestic economy."

Employment numbers started to fall in November after four successive monthly increases in staffing.

According to the IHS Markit survey, sustained fall in new orders had reduced workloads and led them to leave vacant job positions open. With staff capacity down, backlogs of work increased at the fastest rate since November 2020.

Also, expectations for future output fell to their weakest in a year. The overall degree of sentiment fell for the second month running to its lowest level in 12 months.

(Reporting by Seban Scaria ; Editing by Daniel Luiz)

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