A brighter June for Egypt’s non-oil private sector: The contraction in Egypt’s non-oil private sector slowed to its softest pace in almost two years on the back of easing inflation pressures, according to S&P Global’s purchasing managers’ index (pdf). The country’s PMI rose for the third consecutive month to reach 49.1 in June, up from 47.8 in May. This is the highest reading since August 2021 — but still below the 50.0 mark that separates growth from contraction, making June the 31st consecutive month that business activity has been in decline.

Output + new orders drove the gentler contraction in June: “Behind June's sustained uplift in the PMI were output and new orders, which similarly showed rates of decline softening amid reports from some survey members that demand conditions were beginning to show green shoots of recovery,” said Joe Hayes, principal economist at S&P Global Market Intelligence. While non-oil private sector output continued to contract, driven by price pressures, liquidity challenges, and weak demand, it did so at its weakest rate in 21 months. New work intake similarly continued to fall as a result of high prices and subdued economic conditions but did so at its softest rate since December 2021.

Domestic demand lifted by easing inflation — but overseas orders fall sharply: Local clients drove purchasing orders in June as input cost inflation came in at a 16-month low driven by a slower uptick in purchase costs, allowing output charges to rise at a slightly weaker rate. However, new export orders fell at their sharpest rate in nine months.

REMEMBER- Annual inflation rose to 32.7% y-o-y in May and is expected to remain high following hikes to diesel and subsidized food prices. Capmas and the central bank should release June’s inflation figures on 10 July. The PMI inflation gauge measures businesses’ perception of how prices are changing, while Capmas calculates the official figure based on the price of a basket of goods and services.

Confidence is near an all-time low, despite softer contractions across the board: “Business confidence fell to its second-lowest level on record, highlighting a somber mood amongst businesses across Egypt's non-oil private economy,” said Hayes. “If key survey indicators such as output and new orders can sustain their upward current trajectory, we may see an improvement in business sentiment in the coming months,” he added.

FROM THE REGION-

Saudi expansion continues: Activity in Saudi Arabia’s private sector recorded sharp growth in June with the PMI (pdf) rising to 59.6 from 58.5 in May, as both output and new orders rose at accelerated rates. Employment remained high, with some firms increasing wages to maintain experienced staff.

UAE firms see new demand hit four-year high: The UAE’s PMI (pdf) rose to 56.9 in June from 55.5 the month before, as strengthening business conditions caused output and new orders in the country’s non-oil private sector to rise rapidly. New orders were supported by an increase in overseas demand.

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