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Egypt's non-oil private sector shows signs of stabilization amidst challenges in August

While optimism about future output was limited, with only 9% of respondents expecting growth, concerns about” recessionary conditions” remained prevalent

By: Business Today Egypt

Tue, Sep. 5, 2023

In August, Egypt's non-oil private sector demonstrated resilience, maintaining its highest level in two years, according to the latest PMI survey data by S&P Global. Companies continued to report signs of a recovering market, sharing optimism about future activity, leading to increased employment and inventory levels.

The seasonally adjusted S&P Global Egypt Purchasing Managers’ Index (PMI), a comprehensive indicator of non-oil private sector economic conditions, remained at 49.2 in August after beating out its previous record from August 2021 in July. This figure is just below the neutral mark of 50.0, indicating stability.

David Owen, Senior Economist at S&P Global Market Intelligence, noted that "the 49.2 reading was the joint-highest in two years alongside July's figure, as output and new orders fell at modest rates while employment and inventories moved into expansion territory. The findings suggest that the sector has somewhat stabilized in recent months after a prolonged period of contraction.”

While optimism about future output was limited, with only 9% of respondents expecting growth, concerns about” recessionary conditions” remained prevalent.

Companies reported reduced input buying compared to the previous month due to weaker orders, supply challenges, and higher input prices, leading to reduced spending. Input cost inflation reached a five-month high, resulting in higher selling prices compared to the previous month.

In August, output declined modestly, driven by price pressures that constrained capacity.

Non-oil companies faced increased expenses due to factors like weak exchange rates, raw material supply issues, and wage pressures. This led to the quickest rise in business expenses in five months. While business activity continued to decline, it did so at a modest pace, representing stabilization within the sector.

The input cost inflation resulted in stronger selling price hikes in August, after a period of softening. Despite these challenges, hopes for a broader market recovery boosted business confidence to its highest level in five months.

This optimism led to increased employment numbers for the first time since November 2022 and a renewed expansion in input stocks. Inventory building was supported by a slight reduction in average lead times for purchases and a quicker drop in output, resulting in some excess holdings.

However, it's worth noting that the outlook for activity, while improving, remained among the lowest in the series history, highlighting the ongoing challenges facing Egypt's non-oil private sector.