Contraction in business activity stabilizes: Activity in Egypt’s non-oil private sector shrank at the same rate in August as the month before, according to S&P Global’s purchasing managers’ index (pdf). The headline PMI reading came in at 49.2 for a second consecutive month — its highest level since August 2021 —- suggesting conditions have “somewhat stabilized in recent months after a prolonged period of contraction,” said David Owen, senior economist at S&P Global Market Intelligence. The reading is still below the 50.0 threshold that separates growth from contraction, making August the 33rd consecutive month that business activity has been in decline.

TL;DR- “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,” said Owen. “However, a pick-up in inflationary pressures was also indicated by the August survey findings, with some firms noting that a faster increase in input costs had reduced overall activity.”

Inflation continues to stymie growth: The weaker USD-EGP exchange rate, raw materials shortages, and wage pressures led to continued price pressures in August. Businesses raised selling prices at a faster rate last month than they did in July as input costs and expenses rose. Persistently high inflation meant that output and new orders continued to decline albeit modestly as some respondents pointed to a recovery in market demand.

Something’s gotta give: “Comments from surveyed companies suggest that exchange rate problems and cost of living pressures will need to be fully addressed before the country can escape the detrimental effects of inflation which currently runs at a record high,” Owen said.

Remember: Inflation hit another all-time high of 36.5% y-o-y in July thanks to surging food costs and the impact of a series of devaluations. Data for August will be released on 10 September.

Looking into the crystal ball: Only 9% of respondents shared a positive outlook for the coming year — up just marginally from the near-record lows seen in recent months, as businesses continued to fret over a potential recession.

The release received attention internationally: Reuters.

FROM THE REGION-

Growth in business activity in Saudi Arabia slowed to an 11-month low: The country’s PMI (pdf) fell to 56.6 from 57.7 in July — still well above the 50.0 threshold for growth — as output growth eased and demand fell.

Business confidence reached a post-pandemic high in the UAE as rising new orders, higher tourism figures, and more investment spurred optimism. The country’s PMI (pdf) stood at 55.0, down from 56.0 the month before but still marking rapid expansion.

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