CAIRO (Reuters) – Non-oil private sector activity in Egypt contracted for the 30th straight month in May, weighed down by continued high inflation and weak demand, a survey showed on Monday.
The S&P Global Egypt Purchasing Managers’ Index (PMI) strengthened to 47.8 in May from 47.3 in April, but remained well below the 50.0 threshold that marks growth in activity.
“Business activity levels continued to fall in the latest survey period, reflecting sustained efforts by companies to reduce output in line with weaker sales volumes,” S&P Global said.
“However, whilst solid overall, the rate of decline was the softest registered in almost a year-and-a-half, helped by near stabilisations in the manufacturing and services sectors,” it added.
May’s rate of contraction was the slowest since February 2022.
The PMI’s sub-index for overall input prices increased to 59.0 from April’s 58.7, and that for purchase prices rose to 60.1 from 59.9.
Annual urban consumer inflation slowed to 30.6% in April from 32.7% in March, the state statistics organisation reported last month, while core inflation eased to 38.6% from 39.5%.
“The toll of rising input prices and weak demand meant that purchasing activity at non-oil businesses continued to decline, leading to a further contraction in firms’ input inventories,” S&P Global said.
“The pace at which input purchases decreased was the slowest seen since last October, however. Ongoing import restrictions meant that lead times on inputs lengthened, albeit only mildly.”
The new orders sub-index improved to 46.4 from 45.2 in April, while that for output rose to 46.3 from 45.4.
“While firms continued to report subdued demand that was largely attributed to inflation, some respondents began to see a recovery in client orders. Notably, new business intakes in the services economy grew for the second time in three months,” S&P Global said.
The sub-index for future output expectations strengthened to 53.2 from an all-time low of 51.4 in April.
“Despite the improvement, confidence levels were still among the lowest ever recorded, amid continued concerns about demand conditions, inflationary pressures and supply-side challenges,” S&P wrote. “Only 6% of companies were hopeful that output levels will expand over the coming year.”
(Reporting by Patrick Werr; Editing by Toby Chopra)
