(Bloomberg) -- Egypt’s private sector activity kicked off the new fiscal year with an expansion, driven by an uptick in demand that offered additional evidence of an economic rebound.

Non-oil business activity reached an eight-month high in July, the Emirates NBD Purchasing Managers’ Index for the whole economy showed. The index climbed to 50.3 from 49.4 in June, with readings above 50 signaling an expansion.

The expansion was mainly a result of a rise in new orders to the highest level since November 2017, Emirates NBD said in a statement. That increase suggested that consumers were starting to flex some purchasing muscle now that the surge in inflation after the floating of the pound in 2016 has abated. Annual inflation in July came in at 13.5 percent, down from 14.4 percent the previous month and more than 30 percent for much of last year.

“The positive PMI reading for the first month of the new fiscal year supports our view that real GDP growth will strengthen in 2018/19 as there is a greater recovery in the private sector, supported by gradual monetary policy normalization, improved political stability and a rebound in the tourism sector,” Daniel Richards, MENA Economist at Emirates NBD, said in the statement.

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Still, shortages of raw material and higher costs pressured business activity, causing output to contract for the third month, Emirates NBD reported. Staffing levels also continued to decline despite the new orders. The bank attributed the drops to a lack of liquidity.

To contact the reporter on this story: Tarek El-Tablawy in Cairo at teltablawy@bloomberg.net

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Amy Teibel, Keith Campbell

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