Egypt: PMI records worst reading in two years in June
July 6, 2022
The S&P Global Purchasing Managers’ Index—which measures business activity in the non-oil private sector—came in at 45.2 in June, down from May's 47.0. June's result marked the weakest reading since June 2020. With the index falling further below the 50.0 no-change threshold—where it has been mired for the past 19 months—this signals a sharper deterioration in business conditions compared to the previous month. The downturn came on the back of decreasing demand, inflationary pressures and supply shortages. Output and new orders both continued to contract in June and fell to their lowest levels since Q2 2020, as mounting inflationary pressures continued to besiege demand. At the same time, raw materials shortages have contributed to significant increases in delivery times, with backlogs of work growing for the first time in six months, while output prices increased. With regard to firms’ future expectations, sentiment rose to a five-month high. However, sharply rising input costs and geopolitical uncertainty will likely continue to be a big drag on business activity in the near-term.
David Owen, economist at S&P Global Market Intelligence, explained:
"Egyptian companies suffered from a sharp downturn in new business in June, leading to the strongest deterioration in economic conditions since Covid-19 measures were introduced in the second quarter of 2020. The sharp drop-off in demand came from rising inflation and tightening monetary policy, as the Central Bank's decision in May to devalue the pound against the U.S. dollar, in response to interest rate rises by the Federal Reserve, added to the cost of importing goods.”
Author: Marta Casanovas , Economist