Egypt's PMI records 45.2 in June, records worst slump in business conditions for two years

CAIRO – 6 July 2022: Egypt Purchasing Managers’ Index (PMI) recorded 45.2 in June, down from 47 in May, marking its weakest performance in exactly two years.

 

The data of the index revealed that the reading was the lowest recorded since June 2020 during the first wave of the COVID-19 pandemic, and below the series average of 48.2.

 

It clarified that businesses saw demand slump in the face of sharply rising prices, a devalued pound and material shortfalls. 

 

“At the same time, the latest PMI survey data signaled the quickest rise in input costs for almost four years, leading to a marked acceleration in the rate of selling charge inflation,” it elaborated, adding that with new business falling sharply, and reports that geopolitical headwinds had reduced commodity availability, firms greatly reduced both their own activity and input purchases. 

 

Two of the largest components of the PMI, the Output and New Orders Indices, both declined to their lowest levels since the second quarter of 2020 in June, registering marked contractions in both activity and sales. 

 

Economist at S&P Global Market Intelligence, David Owen, said that Egyptian companies suffered from a sharp downturn in new business in June, leading to the strongest deterioration in economic conditions since COVID-19 measures were introduced in the second quarter of

2020. The sharp drop-off in demand came from rising inflation and tightening monetary policy, as the Central Bank's decision in May to devalue the pound against the US dollar, in response to interest rate rises by the Federal Reserve, added to the cost of importing goods.

 

"Following this, businesses raised their selling charges at the fastest rate since February 2017, contrasting with only modest increases in the first five months of the year. The sharp uptick suggested that firms were ready to pass on a greater bulk of their costs to customers amid sinking hopes that discounts would help spur a demand recovery,” Owen added.

 

According to Owen, supply conditions also remained weak and added to inflationary pressures, as firms signaled that raw material supplies were becoming increasingly difficult to secure. Combined with a sharp fall in output, companies responded by lowering their purchases to the greatest extent since April 2020."

 

"While the reduction may offset some cost pressures, the June PMI data shows that hawkish monetary policy in the US and a rising dollar value is likely to keep supply side inflation running high. The Fed's latest rate rise of 75 basis points adds to these concerns, while the Central Bank's decision to keep policy unchanged in June could put additional pressure on exchange rates,” he concluded.