Egypt’s PMI dips in September, signaling decline in non-oil private sector activity

Cairo – October 3, 2024: The Egyptian non-oil private sector reported a decline in activity last month, with the S&P Global Egypt Purchasing Managers’ Index (PMI), a key indicator of business conditions in the non-oil private sector, revealing a downturn in September, registering 48.8.

Egypt’s PMI rose to 50.4 into growth territory in August, breaking an almost three-year streak in which it remained under 50.0 – which signals deterioration in economic conditions – since November 2020.

The latest survey results indicate a renewed decline in business performance, attributed primarily to escalating price pressures, which have negatively impacted sales and overall business operations.

“The downturn meant that August's foray into growth territory (the PMI at 50.4) is still the only instance of improving business conditions since late 2020, with the PMI dropping to a five-month low of 48.8 in September,” explained David Owen, Senior Economist at S&P Global Market Intelligence.

“There were some positives from the latest data, however, namely that firms continued to increase their buying levels and staffing. The expansions suggest there is still some hope that the non-oil sector could bounce back in the fourth quarter,” he added.

Despite challenges, business confidence regarding the 12-month outlook for activity remained positive, although with a decline in optimism from August to its lowest point in three months.

The overall sentiment indicates that while some companies are still hopeful for economic improvement, many remain cautious in the face of ongoing price pressures and slow domestic demand.

Both output and new orders experienced significant drops in August, with the rate of decline in new business accelerating to the sharpest level in five months. The downturn reverses a brief period of growth in August, highlighting the challenging economic landscape faced by non-oil companies in Egypt.

Surveyed businesses noted that diminished customer demand, particularly from domestic markets, was a key factor behind the decline.

Despite these challenges, there was some positive news as new orders from abroad increased for the fifth consecutive month, suggesting that international demand remains stronger than domestic.

The September data also reflected rising input costs, as overall input prices surged at the fastest pace since March, driven by higher raw material costs and currency depreciation. To balance with costs, businesses raised their selling prices, although the increase was more moderate than in the previous month.

Additionally, purchasing activity remained stable, with firms continuing to build inventories in anticipation of a potential recovery in demand. However, supply chains experienced delays, leading to longer delivery times for inputs.