CAIRO - 3 April 2024: The S&P Global Egypt Purchasing Managers’ Index (PMI) increased from 47.1 in February to 47.6 in March, indicating a softer deterioration in the health of the non-oil private sector economy.
The March PMI survey indicated that recent measures taken to address Egypt's currency crisis, such as raising interest rates and floating the Egyptian pound, provided some relief in terms of price pressures. The overall rate of input price inflation dropped to a three-month low, with some firms benefiting from improved local market exchange rates.
However, other firms experienced further increases in material prices, and the rising cost of living led to the strongest rise in wages since October 2020. Average output prices increased at a slower rate compared to the previous three months, but still exceeded the long-run trend.
Business activity and new order volumes experienced significant declines in March, comparable to the rates observed in February. Firms reported that volatile currency markets negatively impacted customer demand and led to increased prices.
"Businesses in Egypt's non-oil private sector continued to come under pressure from the country's recent currency crisis in March. The sharp fall in Suez Canal activity due to the Red Sea crisis led to a marked drop in US dollar inflows in February, causing exchange rates and inflation to spiral upwards. February's PMI results indicated a considerable downturn in business activity, and March was little different, except for a modest reduction in the rate of decline,” Senior Economist at S&P Global Market Intelligence, David Owen, said.
The decline in demand remained largely unchanged in March, as new order volumes experienced a sharp decrease. Survey respondents attributed this decline to the weak exchange rate of the pound against the US dollar, as well as general price uncertainty, which led to reduced client spending. However, there was a positive development as higher foreign demand supported the first increase in new export orders since December 2022.
Despite some positive signs, sentiment regarding future activity decreased in March and reached one of the lowest levels in the history of the series. While firms maintained a positive outlook for the next 12 months, there were concerns that economic conditions would continue to be depressed, leading to further sales declines.
In March, non-oil companies continued to witness a robust decline in input purchases, primarily due to lower new work inflows. Higher prices also constrained buying activity, according to some companies, while shipping issues and material shortages contributed to a further decline in vendor performance.
On a more positive note, businesses increased their staffing levels for the first time in 2024, offsetting the reduction observed in February. This slight increase also led to a fractional decrease in backlogs of work, marking the first decline since last June.
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