Private sector contracts at a slower pace in February: Activity in Egypt’s non-oil private sector contracted for the 27th consecutive month in February, albeit at a slower pace, according to S&P Global’s purchasing managers’ index (pdf). The PMI reading rose to 46.9 in February from 45.5 a month earlier, but remained below the 50.0 mark that separates growth from contraction. The report attributes the contraction to persistently high inflation as supply chain pressures and the ongoing depreciation of the EGP took a toll on demand.

Private firms “are likely to face a prolonged downturn in 2023” on the back of persistent inflation, weakened demand, and ongoing import controls, despite initial signs of improvement in the global economy, S&P Global economist David Owen said. “S&P Global Market Intelligence believes that FX markets are not yet at their equilibrium state and that inflation will likely remain in double-digits this year."

The upside: Is inflation softening? Two of the index’s key price metrics “saw a notable softening” last month after hitting multi-year highs in January. Purchase price inflation retreated to its lowest since October from a four-and-a-half-year high in January as businesses “suffered to a lesser extent from weaker exchange rates and rising import costs,” said Owen. Output price inflation similarly dropped to its lowest in four months following a near six-year high in January. “The findings provide some hope that inflation may start to soften,” Owen writes, while conceding that prices are still rising sharply on the back of the ongoing depreciation of the EGP.

REMEMBER- We’ll know more about the direction prices are headed at the end of this week.when official inflation data for February lands.

Business sentiment fell to a near-record low: Business confidence fell to come in only slightly above October’s record low, with just 5% of survey respondents forecasting a rise in output over the next 12 months.

Fewer hands on deck: Businesses slashed headcount for the third month running and at the

fastest rate in nine months as demand continued to drop.

The news got international coverage: Bloomberg.

FROM THE REGION-

The Saudi non-oil private sector grew at its fastest pace in almost eight years: Saudi Arabia’s PMI (pdf) rose to 59.8 in February from 58.2 in January on the back of a sharp surge in demand on better macro conditions.

Non-oil business activity in the UAE saw its strongest upturn since October, with the PMI (pdf) inching up to 54.3 in February from a 12-month low of 54.1 in January. That said, new business grew at its slowest rate in 17 months, “suggesting the improved growth picture may be short-lived.”