Arab Finance: The Egyptian non-oil economy has seen a downturn in economic performance in July 2022, with output and new orders falling at slower rates, according to the S&P Global Egypt PMI™ release issued on August 3rd.

The headline seasonally adjusted S&P Global Egypt Purchasing Managers’ Index (PMI) increased marginally to 46.4 in July from a “two-year low” of 45.2 in June, the data showed.

This marks the largest reading in just over a year, despite remaining below the 50.5 growth threshold which indicates a “deterioration” in operating conditions, the survey added.

Non-oil businesses in Egypt witnessed a drop in new orders' intakes at the beginning of the third quarter (Q3) of 2022, with the rate of contraction easing sharply starting from June affected by higher prices that caused a decrease in client spending.

All the four sectors covered by the survey, namely manufacturing, construction, wholesale and retail, and services, have seen a downturn in July.

Moreover, the survey mentioned that businesses have cut their output levels, however, the downturn eased slightly last July as compared to June, adding that shortages in raw materials, along with lower demand, have restricted their capacity.

Companies linked the slip in demand to inflationary pressures, despite the signs showing they started to soften after June.

“Higher fuel and raw material prices were still often mentioned, although this was partly tempered as lower commodity prices in recent weeks began to alleviate pressure on supplier charges,” Economist at S&P Global Market Intelligence David Owen commented.

Additionally, 29% of surveyed companies reported an increase in their input costs in July amid ongoing supply chain challenges related to the Covid-19 pandemic and the Russian-Ukrainian war, in addition to the solid performance of the US dollar.

Accordingly, the increasing prices of raw materials, fuel, and foodstuff have pushed non-oil firms to raise their selling prices at a slower pace in July.

Furthermore, purchasing activity continued slipping for the seventh consecutive month driven by weaker demand and higher prices that impacted spending plans, according to the survey.

As for the employment levels, companies noted that they have been stable last month as an “eight-month run of job losses” ended.

Business outlook is likely to remain toned down for the coming 12 months, with sentiment falling sharply after hitting a five-month high in June, the survey pointed out.

On the other hand, only 13% of companies expected growth of output over the next year.

"Nevertheless, the demand picture still appears challenging, leading businesses to give a relatively downbeat outlook for the coming year. Output forecasts in July were down to one of the weakest recorded in the series history,” Owen said.

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