Egypt’s purchasing managers’ index (PMI) increased slightly to post 49.3 in February, up from 48.7 in January, signaling a slight deterioration in operating conditions, according to the PMI report released by IHS Markit on Wednesday.

The report also noted that the rate of decline was the softest in three months, and the index was also above its long-run average of 48.2.

Yet, the report showed that Egypt’s non-oil private sector’s economic conditions weakened for the third month in a row in February amid declines in output and new business, adding that the pace of contraction softened from January and was marginal, helped by a record expansion in exports.

Meanwhile, rising raw material and freight prices drove a robust rise in input costs, yet output charges rose only slightly, according to the report.

On private sector output, the report said it decreased for the third month in a row in February, which companies related to a fall in sales amid the continued impact of the COVID-19 pandemic.

On the other hand, the report expounded that the pace of contraction slowed since the start of 2021 and was only modest.

Likewise, the drop in new sales was less marked compared to that seen in January, partially due to a strong upturn in export demand.

“In fact, the rate of new foreign business growth was the sharpest in nearly ten years of survey data collection. Firms also reported an increase in new contracts as well as a slight improvement in tourism activity. Nevertheless, overall demand was hampered by weak customer spending as markets remained depressed due to the pandemic”, said the report.

The report unveiled that reductions in output and new orders pushed Egyptian companies to lower their purchasing activity in February, which led to extend the decline seen since the end of 2020.

Meanwhile, inventories of purchased items were also driven down, albeit only marginally, according to the report.

The report also said that job numbers in Egypt continued to drop midway through the first quarter, as some firms mentioned that they did not replace voluntary leavers in a bid to lower staff costs.

Accordingly, the rate of job shedding was the softest in 16 months, as some companies increased hiring due to rising workloads, according to the report.

Input cost inflation remained solid in February, despite ticking down to the weakest since last September, driven by the higher prices of metals, iron, and steel, according to the report.

It said that panellists reported an increase in freight charges as well, as rising global demand and weak container supply weighed on shipping rates.

The report forecast a hard 2022 for the sector, although companies expect output to pick up from current levels.

“Around 29 percent of businesses forecast growth, against just 1 percent predicting a decline. In the latter group, however, some firms highlighted the risk of permanent closure due to the steep economic downturn caused by the pandemic”, according to the report.