Non-oil private sector activity drops further in April as it enters 41st straight month of contraction

Business activity at its second lowest point in the last 12 months despite hopes of a post-float rebound: Activity in Egypt’s non-oil private sector activity slipped further in April, while inflationary pressures fell and business sentiment improved, according to S&P Global’s Egypt Purchasing Managers’ Index (pdf).

Forty-one months in contraction: The index inched down to 47.4 in April from 47.6 in March, marking the 41st consecutive month that Egypt’s PMI remained below the 50 threshold that separates growth from contraction.

We’re still yet to see an anticipated turn around in activity following the EGP float: The recent policy shifts, including the EGP float, the expanded IMF package, Gulf investments, and funds from international lenders have yet to fully feed through to the real economy. However, “while we haven't yet seen much of an effect on the activity side of things, there has been a material impact on price pressures facing firms,” S&P Global Market Intelligence Economics Associate Phil Smith said.

“April’s survey showed a considerable easing of inflationary pressures,” with input cost inflation falling to its lowest level since March 2021. On the back of an easing of cost increases and continuing low demand, business also hiked prices at a slower rate during the month.

Sentiment improved, but businesses are still pessimistic on growth prospects: Business confidence towards future activity over the next 12 months improved to a six-month high, reflecting hopes of exchange rate stability and easing inflation. However, the level of optimism remained low “by historical standards,” the survey read. “Very few firms are anticipating growth in the coming year, in a sign of continued caution towards the outlook,” Smith said.

New order volumes continued to fall on the back of “weak demand conditions, high prices and volatile exchange rates.” Optimism that last month’s uptick in export orders would continue was short lived, as export orders kept at the same level.

As did staffing levels: Following a brief uptick in March, employment in the non-oil private sector renewed its decline in April, albeit at a marginal level. Salaries also increased with a rise in the cost of living, but at a slower pace.

Reuters also had the story.