Egypt’s non-oil private sector activity slipped further in September as new orders dipped at the quickest pace in five months, according to S&P Global’s latest Purchasing Managers Index report (pdf). The country’s headline figure fell in September to a three-month low of 48.8, down from August’s 49.2.

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The country’s headline figure has been below the 50.0 threshold that separates growth from contraction for seven straight months and has only pushed up into the green twice since November 2020. Despite the dip, the reading is still above the survey’s historical average of 48.2.

New orders saw the fastest decline since April, stemming from a drop in sales due to “subdued economic conditions, rising prices and greater wage pressures,” according to businesses surveyed. In line with falling demand, output decline accelerated for the seventh consecutive month in September, but it was moderate and softer than the series' long-run trend. Businesses also raised their selling prices for the fifth straight month to pass higher costs through to customers.

Businesses scaled back their purchasing for the seventh consecutive month, albeit at a moderate pace. Meanwhile, stocks of purchased items inched up for the first time since May as some firms chose to hold more inputs in reserve.

But on the bright side, cost pressures eased to their lowest level since March, which businesses partially attributed to the EGP’s relative stability against the USD. “Although companies are struggling to gain new work amid challenging market conditions as a whole, they can take some comfort from a softening of input cost pressures, driven by the EGP’s strengthening against the USD over recent months,” S&P Global Senior Economist David Owen wrote. Firms also reported some upward pressure on wages, with total staff costs edging up to their highest level since May 2024.

Employment remained broadly unchanged during September, after inching up across the two previous months, marking a stalling of hiring growth.

Business sentiment continued to reach new historic lows, with overall expectations for the year ahead dipping to one of their lowest levels in the survey’s history, despite the softening input inflation.

The PMI reading reinforces the need for a balanced policy approach that supports economic activity without compromising stability, banking expert Hany Hafez told EnterpriseAM. With demand still weak, monetary easing alone won’t be enough, Hafez said, adding that any move by the central bank should be complemented by targeted measures to stimulate production and employment so that stability translates into real growth.

The recent stabilization of input costs, helped by a steadier exchange rate, gives policymakers some breathing room to adjust monetary policy, Hafez said. However, Hafez cautioned that the persistent weakness in new orders shows that confidence, not just liquidity, is the key missing ingredient. Building that confidence, he said, will require consistent economic and tax policies, as well as efforts to boost exports and private investment.

ELSEWHERE IN THE REGION-

  • In the UAE, the headline PMI (pdf) edged up to 54.2, up from 53.3 in August;
  • In Saudi Arabia, non-oil business activity saw a robust improvement, with the seasonally adjusted figure (pdf) coming in at 57.8 in September, up from 56.4 a month earlier;
  • Kuwait’s non-oil private sector saw a softened expansion in business conditions, with the headline PMI (pdf) dropping to 52.2 in September from 53.0 in August.
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