More improvement in July for business activity: The contraction in Egypt’s non-oil private sector slowed to its softest pace in nearly two years in July, suggesting “initial pointers of a recovery in market demand following a lengthy downturn,” according to S&P Global’s purchasing managers’ index (PMI) (pdf). The country’s PMI rose for a fourth consecutive month to hit 49.2 in July from 49.1 in June. This is the highest reading since August 2021 but remains below the 50.0 mark that separates growth from contraction, making July the 32nd consecutive month that business activity has been in decline.

Output + new orders once again drove the gentler contraction in July: Rates of decline continued to soften in output and new orders, continuing the improvement seen a month before. “Business activity dropped at the weakest rate in almost two years… The decline in new orders also showed further signs of softening, as firms reported initial pointers of a recovery in market demand following a lengthy downturn,” said David Owen, Senior Economist at S&P Global Market Intelligence. Output decreased across all sectors but at its softest rate in almost two years as some businesses noted a recovery in demand that saw new orders decline only modestly. The improved conditions saw inventories and staffing levels near stabilization.

Has inflation peaked for businesses? High prices continued to dampen spending as input cost inflation ticked up slightly, but selling prices rose at their weakest rate since April 2022 as companies continued to absorb inflationary costs. “If the demand recovery spreads and official inflation metrics show a softening, we could see a pick-up in sentiment soon,” Owen said.

REMEMBER - Annual Inflation hit a record high of 35.7% y-o-y during June, up from 32.7% in May. Capmas and the central bank should release July’s inflation figures on 10 August.

Confidence remains close to record lows: "Despite the general movement back to stabilization territory, firms are still fairly subdued about the future, with just 6% expecting output to grow over the next 12 months," Owen noted.

FROM THE REGION-

Saudi Arabia’s PMI (pdf) dropped to 57.7 in July, from 59.6 in June. The pace of growth remains strong but marks a seven-month low for the country on the back of ongoing market repricing adjustments and the rising cost of capital.

The UAE’s PMI (pdf) also dropped to 56.0 in July from 56.9 in June. Business activity grew at a slightly slower pace as sales expansion slowed to a four-month low.

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