Egypt non-oil activity contracts for 27th month as prices surge

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CAIRO, March 5 (Reuters) – Egypt’s non-oil private sector activity shrank for the 27th month in a row in February as surging inflation and obstacles to importing from abroad extended business travails, a survey showed on Sunday.

The S&P Global Egypt Purchasing Managers’ Index (PMI) strengthened to 46.9 in February from 45.5 in January, but was still well below the 50.0 threshold that marks growth in activity.

“After hitting a four-and-a-half-year high in January, the rate of purchase price inflation softened to the lowest since October, as firms suffered to a lesser extent from weaker exchange rates and rising import costs,” S&P Global economist David Owen said.

The PMI’s sub-index for overall input prices slipped to 62.7 from January’s 72.3, and that for purchase prices fell to 63.9 from 72.7.

Headline inflation in Egypt surged to a five-year high of 25.8% in January, the state statistics organisation reported last month.

“Amid the bleak outlook, non-oil companies opted to reduce their purchasing activity sharply in February, S&P Global said. The rate of contraction, however, was the softest in four months.

The sub-index for output improved to 44.6 in February from 42.3 in January and that for new orders to 44.7 from 42.6.

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 sub-index for future output expectations worsened to 52.5 from 53.1 in January, nearing an all-time low.

“Notably, just 5% of survey respondents forecasted a rise in output, amid suggestions that current headwinds, including weak demand, severe inflation, import controls and foreign currency shortfalls, are likely to continue throughout 2023,” S&P wrote.

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