Egypt’s non-oil private sector Purchasing Managers’ Index (PMI) fell to 48.7 in September from the previous month’s 49.2, marking a four-month low, according to the latest reading published by S&P Global.
S&P’s assessment indicates a continued deterioration in operating conditions within Egypt’s non-oil private sector businesses. The report further highlights that Egyptian non-oil companies faced significant challenges in September, primarily stemming from supply chain issues and rising inflation as the third quarter of 2023 drew to a close.
“Weighing on the headline figure were sharper drops in output and new orders, as Egyptian non-oil businesses continued to signal a depressed demand environment due to high inflation,” the report highlighted.
Furthermore, firms frequently encountered challenges in procuring raw materials due to import difficulties and rapid price increases, leading to weaker sales, the report noted. “The resultant pressure on operating capacity led to the sharpest increase in backlogs of work ever recorded by the survey since it began in 2011,” it added.
David Owen, Senior Economist at S&P Global Market Intelligence, explained that Egypt’s non-oil companies faced significant pressure on their operating capacity in September, even though sales continued to decline. The PMI Backlogs of Work Index signaled a record backlog of incomplete orders.
“Firms frequently reported that the high-inflationary environment – annual urban inflation reached a record high of 37.4% in August – and a lack of raw material supply meant they were often unable to fulfill client orders. Adding to this, firms were reluctant to draw down inventories as the outlook for supply and prices remains challenging, resulting in output levels dropping sharply and to a greater degree than new orders,” Owen noted.
He added that the weak performance of the local currency against the US dollar caused another steep increase in purchase prices in September, indicating that inflation would remain high until factors such as food supply and foreign currency reserves are brought under control.
“This added to a generally subdued level of confidence toward future activity, as well as another sharp reduction in purchasing levels,” according to Owen.
On the other hand, Owen explained that operating conditions in the non-oil business continued to weaken but at a mild overall pace, following recent positive movements in the PMI. The latest reading of 48.7, although the lowest since May, still remained above the series average. Additionally, the strong employment reading indicated that firms were willing to increase their staff numbers, while new orders, despite declining more rapidly, decreased only modestly.
The report stated that firms across the sector increased employment levels in September for the second consecutive month, and this increase was most notable in the services sector, which required additional workforce.
