Egypt’s non-oil private sector activity continues contraction but PMI improves to 46.9 in April

Egypt’s non-oil private sector activity contracted in April, continuing a 17-month deterioration as the ongoing war in Ukraine added to price increases, a survey revealed on Sunday.

The S&P Global Egypt Purchasing Managers’ Index improved to 46.9 in April from March’s 46.5. However, it still remained below the 50.0 threshold that separates growth from contraction, the survey added.

“Business conditions in Egypt’s non-oil economy remained under strain from inflationary pressures, supply problems and geopolitical tensions in April. The latest PMI survey data pointed to a further marked decline in private sector business activity, driven by a sharp drop-off in client demand and rising input costs.” S&P Global said.

“As a result, businesses continued to reduce their purchasing activity whilst also cutting employment numbers at the fastest rate in exactly one year. Despite improving from a survey-record low in March, business confidence was again downbeat as firms expect price pressures to remain severe.”

Higher global food and raw materials prices continued to cause sharp declines in output and new orders, but at a slightly slower pace, with the sub-index for overall input prices surging to 58.3 in April from 58.6 in March and that for purchase costs growing to 58.8 from 59.1.

“Whilst easing fractionally from March, the downturn was still the second-quickest in just under two years as firms often reported making cut-backs due to rising input costs,”

“Cost pressures largely arose from increased prices for energy and raw materials due to the war in Ukraine, although many panellists also commented on a recent devaluation of the Egyptian pound. Despite softening marginally, the rate of overall input price inflation was strong and remained above the average seen in 2021.”

Output and new orders in April extended a months-long contraction. However, the output index, at 45.3, was slightly better than the 44.6 recorded in March. The index for new orders improved to 45.3 in April from 45.1 in March.

The sub-index for future output expectations eased to 57.7 in April from 52.5 in March, when it was at its lowest since it was first included in the survey 10 years ago. The April figure was still the third lowest in a decade, the survey added.

Manufacturers remained the most exposed to these setbacks, with increased raw material prices and supply shortfalls leading to a solid cut in goods production, although wholesale and retail and services also witnessed a drop-in activity. Construction was the only bright spot as PMI data suggested that activity and new work had increased for the first time in 2022 so far, the survey read.
“The continuation of the war in Ukraine meant that firms expect further price and supply challenges, resulting in another relatively downbeat outlook for business activity. said S&P Global economist David Owen.

“The gap between input prices and output prices also signalled that firms are taking on a large part of the cost burden and delaying price rises until the demand situation has recovered.”