Egypt’s non-oil private sector activity contracted more slowly in May in comparison to April, according to IHS Markit’s Purchasing Managers’ Index (PMI).
The figures reported in April came on the back of the worst performance in a decade due to the coronavirus (COVID-19) outbreak that has ravaged businesses.
The figures show that the non-oil private sector rose by 11 points from a record low of 29.7 in April to 40.7 in May.
The latest figures indicate a softer deterioration in business conditions, albeit one that remained steep overall, falling far below the 50.0 that separates growth from contraction.
The latest reading marked the tenth successive month of declining conditions and the second-fastest in that sequence.
“Outlook for activity in 12 months’ time weakened from April, although it remained higher than March’s recent low,” IHS Markit reported.
It said that businesses were generally hopeful that the eventual passing of the global health crisis could lead to a market rebound. Many firms, however, expressed concerns on the potential impact to exports on the back of the continuing health crisis and greater US-China tensions.
“Output levels continued to contract midway through the second quarter, although the rate of decline eased considerably from April when businesses were widely closed due to the COVID-19 pandemic,” IHAS Markit said.
The global information provider explained that many firms either remained closed in May or operated at reduced capacity, while some were able to reopen.
New business volumes also remained weak, with companies reporting stagnating demand due to the coronavirus. However, the rate at which new orders fell was noticeably weaker compared to April, helped by a slower decline in exports.
Commenting on the latest survey results, IHS Markit economist David Owen said, “Output and new orders fell again as private sector demand remained broadly stagnant. Export sales were also weak. In addition, job losses accelerated to the quickest pace in over three years.”
He added that Egyptian firms can find solace in the eased overall cost burdens for the first time in the series’ history, as wage cuts coupled with only a marginal rise in purchase prices were reported in May.
He continued that this could be important as firms look to maintain low output prices for when the economy recovers, with the market environment likely to be challenging.
“Sentiment was still positive, though concerns arose that the US/China relationship is worsening, which could affect any rebound in global demand,” he noted.