This is the second time for the PMI to rise in 2022, as the index rose in February to 48.1.
In its report on Egypt, S&P said that Egypt’s PMI is still below the 50 neutral threshold, indicating a solid deterioration in business conditions that was the second-fastest since June 2020.
The sector also recorded a notable decline in new orders during April, as client demand decreased under the pressure of the increasing living costs and selling charges.
Meanwhile, new business dropped in April for the eighth consecutive month driven by the weak domestic demand together with a fall in new export sales, according to the report.
In April, the Ministry of Trade and Industry said that Egypt’s non-oil exports grew by $1.5 billion (20 percent) in the first quarter (1Q) of 2022 (January-March) to post $9.1 billion, up from $7.6 billion in 1Q 2021 despite the ongoing global economic challenges.
“Lower demand pressures meant that many firms had a degree of spare capacity in April, as indicated by a modest decrease in backlogs of work. Subsequently, some firms reported leaving open job positions vacant, leading to a drop in employment levels that was the quickest seen in exactly one year,” the report explained.
“In spite of accelerating business costs, selling prices at Egyptian firms rose only slightly during April. In fact, the increase was the weakest seen since July 2021, as companies opted to absorb a large part of the cost burden rather than passing it on to their customers,” it added.
The report further indicated that business conditions in Egypt’s non-oil economy remained under the pressure of the inflationary wave, supply issues, and geopolitical tensions in April.
According to the latest PMI survey data, the decline in private sector business activity in April was fuelled by a sharp drop-off in client demand and increasing input costs, which both led to a reduction in businesses’ purchasing activity as well as cutting employment numbers at the fastest rate in one year.
“Despite improving from a survey-record low in March, business confidence was again downbeat, as firms expect price pressures to remain severe”, the report pointed out.
David Owen — an economist at S&P Global — said that non-oil business activity in Egypt continued to fall sharply in April, as businesses faced a further increase in material and energy costs due to the Ukrainian-Russian conflict and a devaluation of the Egyptian pound in late March.
“Manufacturers remained the most exposed to these setbacks, with increased raw material prices and supply shortfalls leading to a solid cut in goods production, although wholesale, retail, and services also saw a drop in activity. Construction was the only bright spot, as PMI data suggested that activity and new work had increased for the first time in 2022 so far,” Owen explained.
He added that the continuation of the war in Ukraine meant that companies in the non-oil private sector expect further price and supply challenges, causing another downbeat outlook for business activity in the country.
“The gap between input prices and output prices also signalled that firms are taking on a large part of the cost burden and delaying price rises until the demand situation has recovered”, he further added.
The Central Agency for Public Mobilisation and Statistics (CAPMAS) is expected to announce April’s inflation readings on Tuesday.
The latest CAPMAS’s figures showed that Egypt’s headline annual inflation in urban areas has accelerated to 10.5 percent in March, up from the 8.8 percent recorded in February fuelled by the rising food and energy prices amid the war in Ukraine.