Egypt’s PMI Shows Signs of Improvement Despite Persistent Challenges
The S&P Global Egypt Purchasing Managers’ Index (PMI) rose marginally to 49.9 in June from 49.6 in May. This marks the joint-highest PMI reading since November 2020, when compared with June 2021’s figures. However, the index remains below the critical 50.0 threshold that demarcates expansion from contraction, a position it has occupied consistently since December 2020. Nonetheless, June’s figures indicate a softer deterioration in non-oil private-sector operating conditions compared to the previous month.
Key Drivers and Influences
One of the primary factors behind the latest PMI reading is the first increase in new business intakes since August 2021. This uptick in new orders is attributed to improving conditions in both domestic and international markets. The volume of input purchases also rose for the first time since December 2021, suggesting that businesses are beginning to feel more confident in their procurement strategies. Additionally, the contraction rate of output was the softest it has been in nearly three years, reflecting a more favorable business environment.
Input Costs and Selling Prices
Despite a rise in input cost inflation to a three-month high in June, the increase remains softer than the levels experienced during Egypt’s foreign currency crisis earlier this year. This suggests relative stability in the cost of goods, even amidst financial volatility. Businesses have reported only modest increases in selling prices, which may help sustain consumer demand.
Business Confidence
However, business confidence dipped to its lowest recorded level, indicating mixed feelings about future economic prospects. The decline in confidence likely stems from ongoing financial volatility and uncertainties in the global economic landscape.
David Owen, Senior Economist at S&P Global Market Intelligence, commented on the data: “Although output levels continued to fall on average, they were also close to growth territory, as business capacity was helped by a fresh increase in the buying of inputs. If we see further rises in sales and purchases in the second half of this year, firms should have the motivation and need to expand their output.”
Context and Background
Egypt has faced significant economic challenges in recent years, exacerbated by the global COVID-19 pandemic and subsequent economic disruptions. The country’s non-oil private sector has particularly struggled, evidenced by consecutive months of PMI readings below the 50.0 threshold. The recent foreign currency crisis further complicated matters, inflating input costs and impacting the overall economic outlook.
Looking Ahead
While the slight improvement in PMI and the first rise in new business intakes since August 2021 offer a glimmer of hope, the overall economic conditions remain fragile. The mixed levels of business confidence underscore the complexities facing Egypt’s non-oil private sector. Continued monitoring and adaptive strategies will be crucial as the country navigates through its economic recovery phase.
Source: S&P Global.
