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Rising costs, coupled with an uptick in selling prices, affected growth in Egypt’s non-oil sector, causing a dampening effect on new order volumes, according to October’s S&P Global Purchasing Managers’ Index (PMI).
The decline in business activity was marginally offset by mild expansions in firms’ stock levels and employment during October. The rate of input cost inflation also eased back from September’s six-month high, resulting in the PMI rising fractionally to 49.0 from September’s 48.8.
However, the recorded PMI was still below the 50.0 threshold for the second month running, signalling a deterioration in overall conditions.
Sales declined due to weakening market conditions, with sector data also suggestive of a widespread downturn, with the most pronounced cuts in activity and sales seen among construction firms.
A “sharp uptick” in the cost of inputs such as raw materials and utilities, triggered the rise in selling prices, according to survey data, impacted by a strong US dollar value on import prices.
Non-oil businesses also expanded staffing levels for the fourth consecutive month, with the pace of job creation picking up to the fastest since May. Firms also started to build inventories to hold items in reserve amid cost concerns.
Total input purchases also fell for the first time in three months, which helped ease some pressure on supply, survey data revealed.
David Owen, Senior Economist at S&P Global Market Intelligence, said that price pressures continued to restrain the sector from returning to growth territory.
“That said, with the PMI at 49.0 in October, Egypt’s non-oil economy is not too far from growing again, and a lessening of cost pressures in the latest month provides some hope that economic headwinds could ease,” he added.
Non-oil companies projected business activity to rise in the coming 12 months, although, the degree of confidence was particularly weak as the respective index dropped to one of its lowest readings in the survey’s history.
(Writing by Bindu Rai, editing by Seban Scaria)
