Non-oil private sector confidence faces 12-month rally as PMI hits three-year high

Cairo – June 4, 2024: Egypt’s non-oil private sector confidence in the economic outlook for the next 12 months increased in May, with S&P Global raising the Egyptian Purchasing Managers’ Index (PMI) to 49.6 last month, reaching its highest level since almost three years.

Compared to April’s level of 47.4, May’s PMI showed a solid growth trajectory, just below the growth threshold of 50.

S&P Global cited the weakening of inflationary pressures, which contributed to the almost stabilization of demand conditions after March changes in government policy aimed at ensuring better availability of the currency.

“The May PMI reading of 49.6 was the first sign that the rapid cooling of price pressures is starting to stimulate Egypt’s non-oil private sector… That said, the ongoing downturn in industries such as manufacturing and wholesale and retail shows that the economic recovery is still uneven and may take longer to spread to the rest of the economy,” explained David Owen, senior economist at S&P Global Market Intelligence.

Confidence in the economic outlook led non-oil companies to increase hiring for the second time in three months, while input purchases fell at the slowest pace since February 2022, signaling growing optimism among businesses.

Business activity recorded a moderate decline last month amid mixed performance across sectors. The report notes that while the manufacturing and wholesale and retail sectors continue to struggle, activity in services and construction has seen growth.

Inflation pressures showed signs of slowing, with production costs rising at their slowest pace since March 2021.

The report noted that lower exchange rates in local markets led to reductions in prices of imported goods, bringing purchase price inflation to a four-year low.

The decline in input cost inflation in the non-oil economy for a third consecutive month highlights the lasting impact of improved currency availability.

The easing of the overall cost burden has allowed average prices for businesses to increase slightly, while maintaining a stable pricing environment.