PMI says Egypt’s non-oil sector sees growth in new business for first time in three years

New business volumes and sales in Egypt’s non-oil sector rose for the first time since August 2021 in June amid improved demand, according to the latest S&P Global Egypt PMI survey. Egypt’s manufacturing and services sectors saw new orders rise. However, declines in the construction and wholesale and retail sectors painted a mixed picture for non-oil business growth.

As policy changes support easing price pressures and boost demand, economic conditions in Egypt began to stabilize in June. Output levels fell at the slowest pace in almost three years, while input purchase volumes rose for the first time since December 2021. Input cost inflation remained subdued, despite accelerating to a three-month high, leading to another modest increase in sales charges.

The latest Egypt PMI survey reveals that the non-oil sector PMI rose from 49.6 in May to 49.9 in June.

Improving domestic and international market conditions

Egypt’s non-oil companies reported sales growth thanks to improving domestic and international market conditions. They also reported a sharp increase in export orders in June, the strongest in 2.5 years.

“With the headline PMI hitting 49.9 and total new orders rising for the first time in almost three years, businesses appear to be heading towards a recovery,” said David Owen, senior economist at S&P Global Market Intelligence.

As new business, sales and exports surged, Egyptian non-oil companies reported greater efforts to expand their production capacity. Input purchases rose in June for the first time since December 2021. Some companies also increased activity, but declines elsewhere outweighed the gains. Nevertheless, the overall pace of decline in production slowed for a fourth straight month and was the weakest in almost three years.

“If we see further growth in sales and purchases in the second half of this year, companies should have the motivation and the need to increase production,” Owen added.

Stable employment

Employment in Egypt’s non-oil economy was relatively stable in June. While some firms added staff amid rising sales, many reported layoffs and no replacements. As confidence in future economic activity fell to an all-time low, firms remained uncertain about the economic outlook after recent volatility in financial conditions.

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Inflationary pressure is subsiding

June PMI data confirmed that inflationary pressures on Egyptian companies were significantly subdued in the second quarter of the year. Although rising input prices resulted in the fastest cost increase in three months, the pace of input price inflation was still much slower than earlier in the year during Egypt’s currency crisis. Non-oil companies across Egypt raised their input charges at a moderate pace, with the pace remaining at the same rapid pace for the past three months but slower than has been typical over the past few years.

“While June saw the fastest rise in input prices in three months, firms generally said this was due to high volatility in market prices rather than accelerating inflation,” Owen added.

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