Egypt saw its non-oil private sector activity contract further in August, with output and new orders volumes dropping for the sixth consecutive month, according to S&P Global’s latest Purchasing Managers Index report (pdf).

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The country’s headline figure recorded 49.2, marking a slight acceleration in contraction from July’s 49.5, but still above the survey’s historical average of 48.2.

REMEMBER- The all-important 50.0 mark is the threshold separating contraction from growth. Anything above 50 denotes expansion, while anything below indicates contraction.

Output and new orders declined for the sixth straight month, directly driven by subdued customer demand, which firms attributed to weak economic conditions and concerns about inflation. Although the rate of decline was faster than in the previous month, it remained slower than their long-run averages. Despite this decline, the new export sub-index increased and suggests that the weaker EGP is benefiting the country’s export sector, Capital Economics’ James Swanston wrote in a recent research note seen by EnterpriseAM.

Firms scale back on purchasing even as hiring rises: In contrast with rising employment, firms remained cautious with their purchasing habits. Input purchases fell for the sixth month in a row, leading to a further reduction in stocks.

“Employment was also up for the second consecutive month, after a lack of hiring in the first half of the year. However, staffing gains were only mild, while firms remained reluctant to commit to new purchases, particularly as confidence in the year-ahead outlook remains weak,” S&P Global Senior Economist David Owen wrote.

Cost pressures moderated in August: Input cost inflation slowed to its weakest pace since March, reaching one of the lowest levels recorded in the last four-and-a-half years. Firms cited increasing import costs and rising staff salaries as the main drivers. “This adds to our view that headline inflation will fall in the coming months, paving the way for further monetary loosening,” Swanston noted.

Businesses raised their selling prices at the fastest rate since May, which narrowed the gap between input and output price inflation to its smallest in five months. This signals that firms were in a better position to maintain their profit margins during the month.

Future outlook stays muted despite easing costs: “When assessing the year-ahead outlook, Egyptian non-oil companies remained relatively subdued,” the report read, adding that “the degree of optimism was unchanged from July and only marginally higher than June’s record low.”

ELSEWHERE IN THE REGION-

  • In the UAE, the headline PMI (pdf) came in at 53.3, compared to a 49-month low of 52.9 in July;
  • In Saudi Arabia, non-oil business activity saw a robust improvement, boosted by new orders, with the seasonally adjusted figure coming in at 56.4 (pdf) ;
  • Kuwait’s non-oil private sector saw further improvement in business conditions, albeit at a slower pace, with the headline PMI coming in at 53.0 (pdf).
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