After six months of growth, private sector reports contraction

For the first time since July 2014, Egypt’s non-oil private sector slid into contraction in January, according to HSBC’s Purchasing Manager’s Index.

The index fell to 49.3 in January, down from 51.4 in December, indicating that operating conditions are deteriorating. Readings below 50 indicate a decline.

Output fell for the first time in six months. According to HSBC, the companies surveyed largely attributed the drop in output to lower demand. “Anecdotal evidence suggested that slow market conditions and adverse weather conditions weighed on demand during the month,” the report says.

Export orders declined for the second time in the past three months, a trend companies said was partly due to Russia’s economic crisis.

Declining output and lower orders meant that companies reduced their workforce for the second month in a row. From September to November 2014, the survey showed an increase in hiring in Egypt’s private sector.

Input costs are also on the rise, with purchase prices rising at the sharpest rate in four months. Despite rising costs, for the third month in a row companies reported having lowered the prices they charge.

“The numbers show that Egypt's recovery remains weak and vulnerable to downside risk. While we continue to except an upward trajectory for the economy, the gains will come off a low base,” HSBC Senior Economist Razan Nasser said in a press statement.

Egyptian officials have expressed confidence that Egypt’s economy is on the road to recovery, with the finance minister predicting GDP growth above 4 percent in the current fiscal year.