Few silver linings in February PMI as Egyptian private sector contraction accelerates

Non-oil private-sector operating conditions slipped 0.9 percentage points in February to 48.8, moving further away from the all-important 50.0 threshold that separates contraction from growth, according to S&P Global’s latest Purchasing Managers’ Index report (pdf). The dip in the headline figure marks the second straight month in the red.

There were few silver linings, with all five PMI sub-components “at levels consistent with a weakening of business conditions compared to the previous month.” Output declined to end a three-month expansionary streak, new orders contracted at the fastest pace in five months, input costs rose at their quickest pace since May, and a hiring freeze and job cuts also saw staffing levels dropping for the third consecutive month.

Why it matters: Businesses are facing a widening gap between what things cost and the price customers are willing to pay. Global rallies in metals and energy have pushed purchase price inflation to a nine-month high, but local companies seem to be struggling to pass these costs on, with output prices up only marginally. It seems that the domestic market may have limited wiggle room to absorb price hikes, with companies sacrificing margins to maintain volume.

One bright spot was construction, which was marked as the only sector to report an increase in new orders. Less fortunate were manufacturing, wholesale, retail, and services, which saw new orders fall at the quickest rate since September.