Back to the complete issue
Wednesday, 6 April 2022

Inflation hits private sector activity in March

Activity in Egypt’s non-oil private sector saw its sharpest decline in 21 months in March as the effects of the Russia-Ukraine war and the devaluation of the EGP hit output and new orders, according to S&P Global’s purchasing managers’ index (PMI) survey (pdf). Rising inflation and slowing demand caused activity to decline at a faster pace last month, pushing the gauge down to 46.5 from 48.1 in February, deeper below the 50.0 mark that separates expansion from con}traction.

This is the sixteenth consecutive month Egypt’s non-oil private sector has been in contraction since mounting a brief recovery from the covid shock in 2020.

Wait, isn’t the PMI done by IHS Markit? The monthly PMI releases are now being published under the S&P brand after it completed its USD 44 bn merger with IHS Markit at the end of February. There’s plenty more here if you’re curious.

What they said: “The non-oil economy was clearly hit by the effects of the Russia-Ukraine war during March, with firms often seeing clients pull new orders back amid increased prices and economic uncertainty,” said S&P Global economist David Owen.

Output, new orders and inventory purchases saw their steepest declines since the first wave of the pandemic, driven by a fall in demand as prices rose in key areas like energy, food, fuel and raw materials. “Egyptian firms reacted to higher prices and lower demand by severely reducing their purchasing activity at the end of the first quarter,” S&P wrote.

Manufacturers + retailers were the most affected: "The downturn was clearest to see in industrial sectors such as manufacturing and construction, where businesses and clients were more greatly exposed to energy and material price rises due to the war.” Also impacted by the war: wholesale and retail firms hit by rising food prices amid disruptions to imports of basic commodities like wheat.

The 16% fall in the EGP will provide “some short-term support” but will also “likely accelerate cost pressures,” said Owen.

Businesses cut back on jobs for the fifth month running in response to falling output, according to the survey. Employment fell at the fastest rate since November but remained “modest,” S&P said.

Confidence fell to another all-time low: Outlook for business activity in the year ahead fell to the lowest level in the survey’s history for a second consecutive month. “Worries over inflation and the Russia-Ukraine war meant that hopes of future output growth were greatly depressed in March,” Owen said

The foreign press is taking note of the survey: Bloomberg | Reuters.

ELSEWHERE IN THE REGION- Strong output and new business continued to propel non-oil private sector growth in Saudi Arabia and the UAE last month:

  • Saudi Arabia saw its fastest growth in activity since December 2017. The KSA PMI registered 56.8 in March, up from 56.2 in February, on surging output, rising client demand and recovering supply chains. (PMI, pdf)
  • Output and new orders in the UAE continued to rise despite inflationary pressures tempering purchasing activity, holding the country’s PMI at 54.8 for the second month in a row. (PMI, pdf)

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.