Dubai: Egypt’s businesses are facing a tough summer with weakened consumer demand brought on rising prices as well as a highly devalued pound. Making it worse are the supply shortages that continue to dog the private sector.
It is all playing out amidst the ‘quickest rise in input costs for almost four years, leading to a marked acceleration in the rate of selling charge inflation,” says the June PMI data from S&P Global. “With new business falling sharply, and reports that geopolitical headwinds had reduced commodity availability, firms greatly reduced both their own activity and input purchases.”
June’s PMI is 45.2 and down from the 47 recorded for May. The Purchasing Managers Index score sets 50 as the bare minimum that economies should be aiming for, which would suggest businesses are still operating on a relatively even keel.
"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,” said David Owen, Economist with S&P Global. “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 US dollar, in response to interest rate rises by the Federal Reserve, added to the cost of importing goods.”
Optimism is still in the air
Despite a harrowing June performance, Egypt’s businesses still seem reasonably hopeful about the coming 12 months. “Overall sentiment rose to a five-month high amid hopes that activity will start to recover from its current slump,” the S&P Global report notes.
Is the sentiment justified? For now, “businesses raised their selling charges at the fastest rate since February 2017, contrasting with only modest increases in the first five months of the year,” said Owen. “The sharp uptick suggested that firms were ready to pass on a greater bulk of their costs to customers amid sinking hopes that discounts would help spur a demand recovery.”