Egypt's non-oil private sector activity has improved since February, according to the S&P Global Egypt Purchasing Managers' Index (PMI), which climbed from 46.4 in July to 47.6 in August — its highest reading since February — indicating a softer, but still solid deterioration in business conditions. The latest figures remain below the 50.0 threshold that separates growth from contraction, so the PMI is still in contraction territory, shrinking for the 21st month in a row. "The rise in the headline index was mainly driven by the output and new orders indices, which both ticked higher for the second consecutive month from June's recent lows. That said, the readings were still indicative of marked drops in business activity and sales, as firms continued to see a worsening of client demand in the face of rapid inflation. The drop in new business was widespread, with manufacturing, services, construction, wholesale, and retail all recording a decline," according to the report. It added that there were reports that a lack of raw material supply had constrained total output in August, exacerbated by recent import regulations and the war in Ukraine. On the plus side, input lead times lengthened only marginally, and at the softest rate since the start of 2022. The report also mentioned that with global economic conditions showing signs of weakness, Egyptian businesses saw a fresh decrease in new export orders in August. This followed the first upturn in foreign demand for six months in July. David Owen — Economist at S&P Global Market Intelligence — said: "August saw the key PMI metrics move in the right direction with the headline index up for the second month running, while price gauges continued to fall from their recent peaks. The latest rise in input costs was much softer than in July, supporting a slower uplift in output prices that should ease the burden on consumers over the coming months." "Subsequently, new orders decreased at the softest rate since April, leading to a slower, but still sharp fall in output levels. Furthermore, employment rose at the quickest rate since October 2019, as some firms looked to increase their capacity and support backlog depletion." "However, headwinds on the global economy meant that businesses showed little optimism towards future activity, as expectations slipped to the second lowest on record. Monetary policy uncertainty, a weakening exchange rate, and the continued war in Ukraine mean there are still high levels of risk for the economy over the rest of 2022," he concluded.
