Cairo – Mubasher: Egypt’s non-oil private sector further shrank in October, with business conditions deteriorating at the strongest rate since July 2011, according to a survey sponsored by Emirates NBD and produced by IHS Markit.

The Emirates NBD Purchasing Managers’ Index (PMI) dropped to a 39-month low of 42.0 in October, compared with 46.3 in September, the report revealed on Thursday.  

This reading signals a stretch of the current downturn to 13 months, matching the longest sequence in the survey’s history.

“October’s survey highlights the increasingly difficult operating environment confronting Egyptian private sector firms. It is difficult to see the situation improving before an IMF agreement is signed, as the ongoing FX shortage and EGP weakness on the parallel market are the main factors undermining economic output at the moment”, said Jean-Paul Pigat, Senior Economist at Emirates NBD.

The weakness of the Egyptian pound, against the US dollar in particular, was a key factor behind this downturn for driving higher purchasing costs  to the greatest extent since April 2011.

In this respect, firms also raised their charges at a survey-record pace, the report indicated.

Sheer inflation had an impact on both output and new orders in October.

"Activity dropped at the steepest rate since mid-2013 amid reports of raw material shortages resulting from higher costs. Meanwhile, with charge inflation picking up, client demand deteriorated and new business fell at a marked pace similar to that seen for output" the report explained.

Moreover, uncertainty surrounding the exchange rate led to a steep reduction in new business from abroad.

Employment slightly declined for the seventeenth consecutive month, compared to output and new job creation that is facing backlogs due to Material shortages linked to high inflation.