CAIRO (Reuters) -Egypt’s non-oil private sector contracted for a sixth month in August as weak demand continued to weigh on business activity, S&P Global reported on Wednesday.
Easing cost pressures, however, provided some relief to firms.
The S&P Global Egypt Purchasing Managers’ Index (PMI) dipped to 49.2 in August from 49.5 in July, remaining below the 50.0 threshold that separates growth from contraction. This indicates a modest deterioration in operating conditions, although the rate of contraction was softer than the long-term average of 48.2.
Activity and new orders declined across all monitored sectors, driven by soft customer demand and persistent inflation. The rates of decline in both output and new orders accelerated slightly from July but were slower than historical averages.
Despite the downturn, employment rose for a second month following nine months of stagnation. Companies increased staffing to enhance capacity and address backlogs, although the overall rise in workforce numbers was marginal.
Input cost inflation fell to its slowest since March, slipping to a near 4-1/2-year low. This, coupled with a faster rise in selling prices, helped firms narrow the gap between input and output price inflation.
David Owen, senior economist at S&P Global Market Intelligence, noted that “persistent inflationary pressures appear to be a key factor holding back company sales and output projections.” However, he added that the easing of business cost pressures could eventually lead to a recovery in client demand if passed on as lower prices.
Overall, Egyptian non-oil firms remained cautious, with purchasing volumes and stocks of inputs continuing to decline. Confidence in the year-ahead outlook remained weak, unchanged from July and only slightly above June’s record low.
(Reporting by Patrick Werr; Editing by Hugh Lawson)
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