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RIYADH: Egypt’s non-oil companies posted sales growth for the first time in almost three years, with the Purchasing Managers’ Index (PMI) rising to 49.9 in June from 49.6 in May.

According to S&P Global, the index’s rise, slightly below the 50-point level, was driven by government actions to ease price pressures, which ultimately showed signs of economic stabilization in the country.

Egypt’s non-oil sector has faced headwinds in the past few years as the country grapples with economic shocks triggered by the crisis in neighbouring Gaza, currency pressures and disruptions to construction of the Suez Canal, the U.S. rating agency said in previous reports.

“Egypt’s non-oil economy ended the first half of 2024 on a high, according to the latest PMI data. With the PMI at 49.9 and overall 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.

S&P Global noted that any PMI reading above 50 indicates growth in the non-oil sector, while readings below 50 signal a recession.

The report further noted that the country’s production level fell at the slowest rate in almost three years, while the volume of purchases of inputs increased for the first time since December 2021.

Moreover, input cost inflation remained subdued, despite reaching a three-month high in June, leading to another modest increase in selling costs.

In addition, non-oil order intake in Egypt increased for the first time since August 2021, as the share of companies reporting improved demand began to outweigh the share of companies reporting a decline.

“While production levels continued to fall on average, they were also close to growth territory as business capacity was supported by fresh growth in input purchases. If we see further increases in sales and purchases in the second half of this year, businesses should be motivated and driven to increase production,” Owen said.

He added: “Another positive is that price pressures remained much lower than in the first quarter of this year, during the currency crisis in the country.”

The report highlighted that the manufacturing and services sectors saw an increase in new orders in June, while construction, wholesale and retail trade saw a decline.

Moreover, employment in the Egyptian non-oil economy was relatively stable in June.

As added in the report, although some companies decided to increase employment in the face of growing sales, many enterprises reported layoffs and the inability to find replacements for departing employees.

The June data also showed that inflationary pressure on enterprises was significantly reduced in the second quarter of the year.

“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 concluded.