Arab Finance: Egypt’s non-oil private sector businesses contracted in September as output and new orders declined sharply, with the S&P Global Egypt Purchasing Managers’ Index (PMI) falling to 47.2 from August’s seven-month high of 49.6.

The reading dropped below the index’s long-run average of 48.2, signaling a marked deterioration in business conditions.

Businesses reported cutting activity as customer demand weakened. Survey respondents attributed the decline in new business mainly to softer market conditions, continuing geopolitical disruptions and strong inflationary pressures.

Output and new orders, the PMI’s two largest components, both fell at a faster pace than in August.

Despite the downturn, companies expanded their workforces for a second consecutive month, the first back-to-back increase in employment in more than a year. Hiring was modest, however, and slowed from August.

The additional recruitment reflected efforts to strengthen capacity as unfinished work accumulated for the fifth month running. Firms also remained optimistic that output would rise over the next 12 months, although confidence eased from August’s more than four-year high.

Meanwhile, businesses continued to face substantial operating cost increases, including higher expenses for oil, metals, electricity and transportation. A slowdown in wage inflation to an eight-month low partly offset those pressures.

Companies passed higher costs on to customers through another pronounced increase in selling prices. Although the pace of price rises eased slightly from August, it remained well above the survey’s historical trend.

Purchasing activity also weakened, with firms reducing their intake of materials and components for the sixth straight month. The decline was the smallest since May, but lower purchasing contributed to a third consecutive monthly fall in inventories.