Egyptian non-oil sector continues contraction at slower pace

Mohamed Abd El Ghany

• S&P Global Egypt PMI strengthens to 46.4 from June’s 45.2
• Headline inflation fell to 13.2% in June from 13.5% in May.
• Output and new orders in July extended an almost year-long contraction

Egypt’s non-oil private sector activity shrank again in July, but at a slower pace than June’s two-year low, as demand remains weakened by inflation and shortages continue to put pressure on supply, a survey showed on Wednesday.

The S&P Global Egypt Purchasing Managers’ Index (PMI) strengthened slightly to 46.4 from June’s 45.2, remaining below the 50.0 line that denotes growth. July was the 20th straight month of contraction.

“The rate of contraction eased since June but was still sharp as several panelists found that rising prices led to a drop in client spending,” S&P Global said.

“In addition to weakening demand, survey respondents continued to highlight that raw material shortages had constrained their capacity,” it added, linking those shortages and cost hikes to the pandemic, Russia’s war in Ukraine and to a stronger US dollar.

The manufacturing, construction, wholesale, and retail and services sectors have all seen a contraction, S&P said.

Headline inflation fell to 13.2 percent in June from 13.5% in May.

The subindex for overall input prices fell back to 64.1 from 72.0 in June, while that for purchase costs fell to 64.2 from 70.9.

“Higher fuel and raw material prices were still often mentioned, although this was partly tempered as lower commodity prices in recent weeks began to alleviate pressure on supplier charges,” said S&P Global economist David Owen.

Output and new orders in July extended an almost year-long contraction, though the output index, at 43.6, improved from June’s 41.3, and the index for new orders rose to 43.1 from 41.9.

“The demand picture still appears challenging, leading businesses to give a relatively downbeat outlook for the coming year,” Owen said.

The subindex for future output expectations fell to 56.1 from 63.7 in June, a reading close to its lowest since the survey first included the category 10 years ago.