Egypt’s non-oil business activity expands for first time in three years

Business activity in Egypt's non-oil private sector economy expanded for the first time since August 2020, as output grew on the back of higher demand.

The seasonally adjusted S&P Global Egypt purchasing managers’ index ­– a crucial gauge of the nation’s non-oil economy – rose to 50.4 in August, from 49.7 in July, staying above the neutral 50 mark that separates growth from contraction.

“Business conditions are on the mend according to the August survey data,” said David Owen, senior economist at S&P Global Market Intelligence.

“Several of the PMI sub-indexes signalled growth in August, with increases in output, employment and purchasing activity showing that firms were confident enough to expand their activity and capacity. Business expectations were also up, adding to signs that firms are hopeful that economic conditions are set to be more stable.”

Demand recovered in the Arab world's most populous country, with companies hiring and boosting their inventory as optimism about future business activity rose to the highest level in just over two years.

This was the second month in a row that businesses increased recruitment amid expectations of more business activity, the survey's results showed.

Inflationary pressure at non-oil businesses also increased as companies faced greater costs due to a weakening in the pound against the US dollar. As a result, selling charges rose as businesses sought to protect their margins amid higher input costs.

The rate of input price inflation accelerated for the third consecutive month, while transport costs were also reported to have increased, leading to a lengthening of delivery times.

Wages also increased as businesses raised salaries further to counter cost-of-living pressures.

Businesses noted that increased cost pressures had acted as a headwind to growth in August by dampening the expansion in business activity.

“The situation appears mixed, with many companies still reporting weak client demand, leading to another slight drop in total new orders,” Mr Owen, said. “Rising price pressures are another risk – August data signalled the fastest uplifts in costs and charges for five months – which has the potential to limit spending and weaken the market recovery.”