Non-oil private sector activity declined for the fifth consecutive month in July, although the rate of decline eased from the prior month, with businesses reporting weaker rates of contraction in activity and new orders, according to S&P Global’s latest Purchasing Managers Index report (pdf).

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

The country’s headline figure rose to 49.5 in July from 48.8 in June, inching closer to the 50.0 neutral threshold that separates growth from contraction. However, the index hit its joint-highest level in the past five months, reflecting only “a marginal decline” in the sector’s health.

New orders and overall output continued to contract during the month, but at softer rates. Although Egypt’s July reading shows deteriorating non-oil business conditions, there is still reason for optimism, as the drop in sales was eased by many firms securing new work, S&P Global Senior Economist David Owen said.

Meanwhile, input costs rose at a slower pace in July, with the acceleration led by an increase in purchase prices for items that include fuel, cement, and packaging. Firms also cited a mild increase in wages as a factor in the rise in input costs. “The concurrent increase in output prices was only slight, which should provide assurance that customers will not face large price swings in the near future,” Owen said.

Businesses continued to slash their input purchases for the fifth consecutive month, but at a much softer pace than June’s 11-month record cutbacks. “Supply chain conditions remained relatively stable, allowing firms to maintain stocks of purchases at broadly the same level as the month before,” the report read.

Employment is gaining momentum: “Businesses also had the confidence to hire new staff, leading to an increase in employment for the first time in nine months, if only a fractional one,” Owen said.

Business sentiment for the year ahead improved “only slightly” from June’s record dip, but remained “historically subdued” in July amid concerns from the surveyed companies about demand and wider economic uncertainty.

Domestic demand lifts Egypt’s PMI, but inflation risks loom: A dip in the new export orders, sub-component of the news orders, suggests that domestic demand led the improvement in our non-oil business activity, Capital Economics’ James Swanston wrote in a research note seen by EnterpriseAM. However, Swanston warned that if July’s rising input and output prices “translates into inflation staying elevated in the coming months, the central bank may decide to keep the monetary easing cycle on pause for longer.”

ALSO FROM THE REGION-

Non-oil business activity across the region showed varying trends in July-

  • In Saudi Arabia (pdf), the sector expanded at a lower pace than in June, marking the slowest growth since January 2022, with the seasonally adjusted figure coming in at 56.3.
  • Kuwait (pdf) maintained solid growth, supported by a strong increase in new orders and business activity.
  • In the UAE (pdf), the non-oil private sector plunged to its lowest reading in over four years, as regional tensions continued to weigh on sales.
Tags: