Egypt’s business conditions in its non-oil private sector continued to decline in March with businesses still ‘lacking in confidence’ but there was some relief on prices following policy measures.

The latest Purchasing Managers’ Index (PMI) report’s headline figure rose during the month to reach 47.6 from 47.1 in February, with anything below 50.0 indicating decline, showing conditions still worsening but at a slower rate. 

Firms said volatile currency markets had hurt customer demand and driven up prices, but recent policy action meant that input price inflation was not as severe in March, supporting a slower increase in output charges. 

David Owen, senior economist at report authors S&P Global Market Intelligence, said firms were still ‘lacking in confidence’ and respondents to the survey had among the weakest sentiment about the future in its history. 

Businesses came under pressure from the currency crisis during the month following a fall in US dollar inflows in February, which came after the sharp decline in Suez Canal activity due to the Red Sea crisis, he said. 

“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,” he said.

“It was also hoped that the central bank’s intervention in early-March, consisting of an emergency 600 basis points interest rate hike and the floating of the Egyptian pound, would start to reverse the damage.”

PMI survey data suggests this may be the case, with rates of input costs and output price inflation slowing to three-month lows, he said.

“On the other hand, firms are still lacking confidence that activity will grow over the year ahead, suggesting that economic risks may take more time to disappear.”

The PMI headline index was below the average reading seen since the survey’s inception in April 2011 and the second strongest decline in 14 months. 

New order volumes decreased sharply attributed to the weak exchange rate of the pound against the US dollar, as well as general price uncertainty.

Average output prices increased at the slowest rate for three months but still much faster than the long-run trend. Input purchases at non-oil companies continued to fall at a robust pace in March, mainly 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. 

Businesses raised their staffing levels for the first time this year, which caused a fractional drop in backlogs of work, the first recorded since June 2023.

(Writing by Imogen Lillywhite; editing by Daniel Luiz)