Key insights
- Egypt's private sector contracted sharply in March due to the Middle East conflict, driving up costs and dampening demand. Input prices surged due to fuel and commodity price increases, compounded by a stronger USD. Business expectations turned negative for the first time, citing war uncertainty. While the PMI suggests slower growth, underlying data indicates a solid growth path for the domestic non-oil sector. The stronger USD could have a slight negative impact on US equities.
April 5 (Reuters) - Egypt’s non-oil private sector deteriorated at its sharpest pace in almost two years in March, as the Middle East war drove up costs and dampened client demand, a closely watched business survey showed on Sunday.
The headline S&P Global Egypt Purchasing Managers’ Index fell for a fourth consecutive month, dropping to 48.0 in March from 48.9 in February — its lowest reading since April 2024.
The figure remained below the 50.0 threshold that separates growth from contraction, though it was broadly in line with the survey’s long-run average of 48.2.
Output and new orders were the chief drags on the index, with both measures also hitting their lowest levels for nearly two years. Firms frequently blamed the Middle East conflict for dampening client demand, partly through intensifying price pressures.
In a first, business expectations for the coming 12 months slipped into negative territory, with companies citing uncertainty over the war as a key reason for pessimism, though the degree of gloom was described as mild.
David Owen, senior economist at S&P Global Market Intelligence, nevertheless noted that "the latest figure of 48.0 still relates to annual GDP growth of around 4.3%," adding that "recent data suggests the domestic non-oil sector is on a solid underlying growth path."
Cost pressures remained a serious concern, however. Input prices surged at their joint-sharpest pace in one-and-a-half years, as firms cited fuel costs and other war-related commodity price increases, compounded by a stronger U.S. dollar.
In response, companies raised their selling prices at the fastest rate in 10 months, though the increase remained modest overall.