Three years and counting: Economic headwinds buffeting Egypt’s non-oil private sector continued in November as inflationary pressures weighed on demand and sent business confidence to record lows, according to S&P Global’s purchasing managers’ index (pdf). The downturns in demand and output eased slightly during the month, resulting in a marginal improvement in the headline PMI figure, but continued to decline “solidly,” S&P Global said. The PMI came in at 48.4 in November, up slightly from 47.9 in October.

November 2020 seems like a long time ago: Egypt’s PMI has not climbed above 50.0 — the threshold that separates growth from contraction — since November 2020, making last month the third anniversary of the private-sector downturn.

Inflation + import backlog dragged output down: High inflation continued to “depress customer demand,” while unresolved import problems drove down production in a number of sectors, namely among wholesale and retail companies. Companies also hiked their prices at a faster rate in November to offset higher production costs triggered by currency weakness and supply shortages.

Businesses are not confident about what next year has in store: Business sentiment fell to its lowest levels since at least April 2012 when data collection began. The survey data showed that pessimism about output levels over the next 12 months also sank to an all-time low, with businesses expecting inflation to continue to depress demand and raise input costs.

Remember: Inflation has soared to record highs this year on the back of successive currency devaluations and a chronic shortage of FX. Authorities are widely expected to devalue the EGP again and raise interest rates to new multi-decade highs following this month’s presidential election, a move which would trigger a new bout of inflation and further weigh on economic activity.

Optimism is in short supply: “Optimism in the Egyptian non-oil economy is eroding as we approach the end of the year,” said David Owen, senior economist at S&P Global Market Intelligence. “While the resulting downturns in new business and output were not as severe compared to those seen at the start of the year, they are also showing no signs of letting up, stretching a sequence of decline that goes back to late-2021.”

ELSEWHERE IN THE REGION- Saudi growth eases: Non-oil private sector activity in Saudi Arabia eased to 57.5 in November from October’s four-month high of 58.4, according to the PMI (pdf). The report attributed the drop to “moderations in the rate of staff and inventory growth, as well as a sharp reduction in delivery times.”

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