Egypt's Private Sector Faces Contraction As Costs Rise Again

What’s going on here?

Egypt's non-oil private sector took a hit in September, facing contraction after enjoying just a brief spell of growth in August, which marked its first expansion since late 2020.

What does this mean?

Egypt's Purchasing Managers' Index (PMI) sank to 48.8 in September, slipping under the neutral 50 mark and underscoring new hurdles for the private sector. Rising costs and a shaky currency have pushed up input expenses, softening sales and dragging down business activity. The downturn is clear as both output and new orders indices declined further. Alarmingly, input cost inflation hit a six-month peak, fueled by a jump in raw material prices. This uptick in cost pressures is squeezing businesses, while broader economic challenges and inflation fears are eroding business confidence and dampening future output expectations.

Why should I care?

For markets: Choppy waters for Egypt's private sector.

The latest shrinkage in Egypt's private sector raises concerns about market stability, possibly affecting investor sentiment and foreign investment outlooks. Cost pressures and a faltering currency might deter local and global firms from expanding in Egypt, spotlighting volatile market conditions that call for caution.

The bigger picture: Economic resilience faces a tough test.

Egypt's economic hurdles reflect the broader woes of emerging markets grappling with currency devaluation and inflationary stresses. As businesses scale back due to rising costs, there are ramifications for regional trade and economic strategies. Policymakers may need to swiftly tackle these inflationary issues to steady the economic course.