Egypt’s PMI Indices Slide: Impact of High Prices and Geopolitical Tensions

Summary

    January saw a slight drop in the S&P Global PMI for Egypt, descending to 48.1 from December’s 48.5. However, it’s still under the 50.0 mark, which indicates growth. This ongoing downward trend is associated with significant reductions in output and new orders, due to high prices weakening customer demand. Inflation rate in Egypt has seen a drop to 33.7% in December, a record decrease from 38.0% in September. Tensions ensuing from the Israel-Gaza conflict have affected tourism, which could impact the non-oil economy further.

    The subindexes for new orders and output experienced a slide, while the business sentiment subindex showed a slight decline but remained above its lowest ever level from 2012.

The S&P Global PMI for Egypt declined slightly to 48.1 in January from 48.5 the previous month. This places it below the 50.0 benchmark that serves as an indicator of growth in economic activity.

S&P Global suggests that the consistent decrease in PMI is related to strong contractions in output and new customer orders in January. This is because high prices seem to have persisted in dampening customer demand.

In a positive turn, the rate of Egypt’s urban consumer inflation showed a reduction, falling to an annualized 33.7% in December, down from 34.6% in November. This is a significant drop from the all-time high of 38.0% in September, as reported by state statistics firm, CAPMAS.

Renewed geopolitical tensions, ignited by the Israel-Gaza conflict, have unfavorably impacted tourism activities. As S&P economist David Owen expresses, this situation might lead to further hindrances for Egypt’s non-oil economy over the upcoming months.

Meanwhile, both the new orders and output subindexes registered modest declines. However, the business sentiment subindex demonstrated a modest decrease to 52.1 from December’s 55.1. Despite this drop, it still remains above its lowest level, which was 50.9 in November 2012.

This ongoing economic trend could influence the trading environment, especially for those dealing in assets directly tied to Egypt’s economic activity or its currency.

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