Egypt’s non-oil business activity “inched closer to stabilisation” in December, contracting at its slowest pace in four months, according to IHS Markit’s purchasing managers’ index survey (pdf). An easing of inflationary pressures, increase in export revenues, and uptick in tourism supported new business, though subdued demand and lower output continued to weigh on firms, pushing the gauge up to 49.0 in December from 48.7 the previous month — an improvement, but still below the 50.0 mark that separates expansion from contraction. This is the thirteenth consecutive month private sector activity has contracted.

Input cost inflation saw its fastest slowdown in over three years, due to a softening of increases in purchasing costs and wages, according to the report. “The latest Egypt PMI gave increased confidence that inflationary pressures peaked earlier in the fourth quarter and are now beginning to soften,” said David Owen, IHS Markit economist.

Weak demand and overall price hikes are still problematic: Price pressures were still strong overall, leading firms to mark up their selling prices. These higher rates were partly to blame for subdued customer demand. Business output and new orders fell for the fifth month running.

Tourism and exports had a good month: New business was supported by an improvement in tourism activity and the sharpest rise in export orders since February, according to the report. Egypt’s export revenues recorded a record USD 31 bn in 2021, according to Prime Minister Moustafa Madbouly.

Fewer jobs — though the hiring market shrank more slowly: Lower sales and a relatively mild rise in backlogs impacted hiring. However, the rate of job reduction was softer than the previous month and mostly driven by companies deciding not to replace employees who quit their jobs voluntarily, the report notes.

Global supply chain issues still have a local impact. Delivery times lengthened for the second month in a row, with suppliers unable to mitigate global bottlenecks. The supply delays meant that inventories were depleted for the fifth consecutive month, despite an increase in purchasing activity as some businesses attempted to replenish their stock. However, supply chains overall deteriorated only slightly in December, and less so than in November.

Omicron means businesses are still “downbeat” on outlook, with business confidence recording only a fractional rise from November's one-year low, says the report. Only around 23% of companies gave a positive outlook, as hopes for recovery were dampened by concerns over omicron and price hikes.

ELSEWHERE IN THE REGION- Saudi Arabia’s non-oil private sector activity fell to a nine-month low in December as omicron worries dented Saudi business confidence and new orders. The kingdom’s PMI fell to 53.9 in December from 56.9 in November, reflecting a sharp slowdown in growth even as it continued to expand for the sixteenth consecutive month.