Standard & Poor’s Global reported on Wednesday that Egypt’s non-oil private sector contracted for the sixth consecutive month in August, as weak demand continues to negatively impact business activity, although easing cost pressures provided some relief to companies.

The S&P Global Egypt Purchasing Managers’ Index fell to 49.2 in August from 49.5 in July, remaining below the 50 mark that separates growth from contraction.

This indicates a slight deterioration in operating conditions, though the contraction rate was less severe than the long-term average of 48.2 points.

Activity and new orders declined across all monitored sectors due to weak customer demand and ongoing inflation. The pace of decline in both production and new orders slightly accelerated compared to July but remained slower than historical averages.

Despite this downturn, employment rose for the second consecutive month after nine months of contraction. Companies increased staff numbers to boost production capacity and manage backlog, but the overall workforce increase was modest.

Input cost inflation dropped to its lowest level since March, falling to its lowest point in about four and a half years. This, combined with accelerated selling price increases, helped narrow the gap between input cost inflation and product price inflation.

David Owen, Chief Economist at S&P Global Market Intelligence, noted that “ongoing inflationary pressures appear to be a key factor undermining firms’ sales and output expectations.” He added that easing business cost pressures could eventually lead to a recovery in customer demand if it results in lower prices.

Overall, Egyptian non-oil companies remained cautious amid continued declines in purchasing volumes and input inventories. Confidence in next year’s outlook remained weak, unchanged from July, and only slightly above the unprecedented low recorded in June.