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Thursday, 5 January 2023

Private sector contracts for 25th consecutive month

Private sector ends the year with softer contraction: Business activity in Egypt’s non-oil private sector contracted for the 25th consecutive month in December, albeit at a softer pace, according to S&P Global’s purchasing managers’ index (pdf). The PMI reading rose to 47.2 in December from 45.4 a month earlier, but remained below the 50.0 mark that separates growth from contraction. Surging inflation, a weaker EGP, and import restrictions were once again to blame for deteriorating conditions, S&P Global said.

Inflationary pressures are the biggest culprit: “According to survey panelists, lower activity generally reflected weak demand conditions, as rising prices led customers to make additional cuts to spending,” S&P Global said. Inflation hit a five-year high of 18.7% in November. December’s inflation figures are expected to be released next Tuesday, 10 January.

As well as the falling EGP: "The pound’s depreciation against the USD in recent months continued to drive input costs higher, although the latest data signaled a softer rate of inflation than November's over four-year record,” said S&P Global economist David Owen. The currency has fallen some 34% against the greenback since late October, when the central bank devalued the EGP and moved to a durably flexible exchange rate. A weaker local currency led material prices to surge while staff costs saw a modest rise, respondents said.

Fewer hands on deck: Businesses also slashed headcounts for the second time in three months, pushing backlogs of work to rise at their fastest pace in over two years.

The outlook is still optimistic: “Expectations towards future output improved for the second month running from October's record low and were the strongest since June” despite ongoing concerns over global economic conditions, the report said

The story is getting ink from Reuters and Bloomberg.


Non-oil business activity in the UAE grew at a marginally slower pace in December, with the PMI falling to 54.2 from 54.4 in November, according to S&P Global (pdf). The lowest reading since the start of 2022 provided “further signs that growth momentum has moderated from its post-pandemic peak in the third quarter,” Owen said.

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