Egypt's Purchasing Managers' Index (PMI) for the non-oil private sector fell slightly to 46.7 in March, from 46.9 in February as steep inflationary pressures and a drop in client demand continued to negatively weigh on. According to S&P Global's PMITM survey data released on Tuesday, Egyptian non-oil private sector continued to record sharp contractions in activity and new orders in March, as inflation and supply constraints drove sustained demand weakness. At the same time, exchange rate volatility added to sharp increases in costs and charges, while the outlook for future output remained among the weakest on record. "Steep inflationary pressures and a drop in client demand continued to negatively impact non-oil businesses, chiefly through a sharp reduction in new orders. The rate of decline picked up slightly from the previous survey period, although this was slightly offset by a softer reduction in export sales." the survey read. "Output levels fell at a marked rate across the non-oil private sector during March, in part due to ongoing difficulties with accessing key inputs due to import controls and currency restrictions. That said, the rate of contraction in output eased slightly and was the softest for five months." On a sector basis, firms in the manufacturing, construction, and wholesale and retail categories experienced further sharp drops in output and new orders in March. However, there was positive movement in the services economy. "Here, activity rose for the first time since August 2021 amid a renewed increase in sales." "The sharp rise in inflation to 31.9% in February – the highest in five-and-a-half years – illustrates the daunting cost-of-living crisis affecting the country at present, in large part due to a marked drop in the value of the Egyptian pound over recent months. While the latest PMI data suggested a sharp rise in business costs, the rate of inflation was much softer than at the start of the year." David Owen, senior economist at S&P Global Market Intelligence, said. "Furthermore, the pace of output charge inflation slowed to a five-month low, as companies pulled back on price hikes in a bid to stimulate demand. In addition to a slightly stabler currency market, the data provides some hope that the peak of inflation could be near." Owen added.
