Egypt PMI Holds at 47.2 as Sector Contracts for Tenth Month
Key Facts
Egypt’s non-oil private sector continued to contract in October for the tenth consecutive month, with the S&P Global Purchasing Managers’ Index holding at 47.2, according to Arab Finance. The reading remained below the index’s long-run average of 48.2, signaling continued deterioration in operating conditions relative to that benchmark. The reading came amid sharper declines in business activity and new orders, as weak demand and purchasing power weighed on business. Surveyed companies said stagnant markets and higher prices had weakened customer demand. Participants also cited the conflict in the Middle East as weighing on demand and external market conditions.
Output and new business recorded their steepest declines in four months, according to the survey, reflecting the weak demand described by companies. Companies attributed the weakness to subdued markets, higher prices and declining customer purchasing power. Concerns related to the conflict in the Middle East also affected demand and external market conditions. The declines in output and new orders put pressure on current activity and the flow of new business for companies. The available information in the report did not provide separate readings for the output and new orders indices, but said their rates of decline were the sharpest in four months.
Weak activity coincided with accelerating input cost inflation, which reached its highest rates since May, alongside faster increases in purchase prices and staff costs. Companies responded to rising operating costs by raising selling prices at the fastest pace since June, in an attempt to pass some of the pressures on to customers. Input costs and selling prices thus rose in parallel with declining demand, according to the survey results. These developments highlight continued price pressure on companies and customers, while companies said higher prices had weakened purchasing power. The report did not provide specific figures for input inflation rates or selling price increases.
On purchasing and inventories, companies sharply reduced their purchases of inputs but accumulated inventories for the first time since June. The survey indicated that companies aimed to build buffer stocks against the possibility of continued price pressures. This came as suppliers’ delivery times lengthened by the most since June. The report linked the delays to shipping disruptions, material shortages and slow customs procedures. Together, these factors point to reduced purchasing, increased buffer stocks and slower arrival of supplies at companies.
Employment edged down in October after two consecutive months of hiring growth, with companies attributing the decline largely to employees leaving voluntarily. Backlogs of work also fell slightly, for the first time since January, according to the survey. This means companies recorded a limited decline in unfinished work alongside contractions in output and new orders. At the same time, the two-month period of job creation ended, with a modest decrease in employment in October. The report did not specify the number of jobs or the volume of backlogs that changed.
Business confidence fell to a seven-month low, leaving companies only slightly optimistic about output over the coming year. Participants said wars, high inflation and supply chain disruptions were among their main concerns. These concerns weigh on companies’ output outlook as non-oil activity continued to contract in October. The index reading of 47.2 marked the tenth consecutive month of contraction and remained below the long-run average of 48.2. The report did not include a specific date or numerical forecast for the next index reading.