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Commodities Update — Gold, silver inch higher; Wheat rises on Black Sea supply woes; Copper hits one-month high

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Egypt’s May PMI signals health of the non-oil private sector is still worsening: S&P Global

Egypt’s Purchasing Managers’ Index posted 47 points in May — a slight increase from 46.9 in April — but well below the neutral 50 threshold, according to S&P Global.

The rise points to a continuing deterioration in the business conditions of the non-oil private sector, the firm said.

The largest contributors of the PMI — the output and new orders indices — continued to post below the 50 threshold, signaling a sharp decline in business activity and demand, according to the press release.

Demand and activity across the non-oil economy continued to fall in May, as rising prices kept putting pressure on client spending.

The reduction in new orders was the fastest since June 2020.

The firms that reported a fall in sales said this was caused by a drop in demand on the client side, driven by increased price pressures. 

“Firms often commented that a strengthening of the US dollar added to the burden of incredibly-high commodity prices from the war in Ukraine, and the prevailing effects of the Covid-19 pandemic,” said David Owen, an economist at S&P Global.

Other key factors that contributed to supply shortages were the banning of a number of foreign products, due to certification issues, and custom delays due to the requirement of letters of credit for importing goods.

Despite worsened suppliers’ delivery times for the seventh month running, stock levels remained broadly stable, as fewer inputs were used in production, according to S&P Global, citing the results of the survey.

In line with input cost inflation, non-oil companies increased their charges to a greater extent in May. However the uptick was only modest compared to cost rises. Backlogs of work also fell in May, for the fourth month in a row.

Against this negative background, survey data pointed to a modest fall in staffing during May.

The firms’ outlook for business activity fell to the second-lowest since April 2012.

“The latest Central Bank decision to raise interest rates by 2 percentage points will make businesses more likely to rein in spending and investment until the current inflation wave has been crested,” Owen said.

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