Egypt’s non-oil private sector PMI hit a 33-month high

Egypt’s non-oil private sector economy moved closer to growth in May, hitting a 33-month high in the Purchasing Managers’ Index (PMI) released on Tuesday as inflationary pressures continued to ease.

The headline PMI for May rose to 49.6 from 47.4 in April, hitting its highest level since August 2021. The PMI, compiled by S&P Global, remained just below the 50.0 level that separates growth from contraction.

The main factor behind the positive trend was the easing of inflation, attributed to improved currency availability and lower exchange rates. Input costs rose at the weakest pace since March 2021, and purchase price inflation fell to its lowest level in four years. This resulted in only a slight increase in average prices charged by companies for the second month in a row.

“May’s PMI reading of 49.6 was the first sign that the rapid cooling of price pressures was beginning to stimulate Egypt’s non-oil private sector,” said David Owen, senior economist at S&P Global Market Intelligence. “Manufacturing and new orders indicators closed most of the gaps to the 50.0 growth threshold, with the services and construction sectors even seeing improved activity as comments suggested greater price stability was driving customer spending.”

Despite the overall positive trend, the economic recovery remains uneven, with the manufacturing and wholesale and retail sectors continuing to experience a downturn. However, easing input cost inflation combined with mild increases in selling prices are expected to boost customer confidence and encourage spending.

Business confidence also improved in May, which led to an increase in employment for the second time in three months. Purchases of inputs declined at the slowest pace since February 2022, further pointing to a positive outlook for the Egyptian economy.

Policy measures introduced in March to improve the availability of the currency contributed to easing inflation. Businesses reported greater price stability and greater confidence, leading to a slower decline in the level of new orders from September 2021. The number of new export orders also increased for the second time in three months, driven by rising overseas demand.

Although the rate of purchase price inflation fell to a four-year low, businesses faced relatively high levels of wage inflation in May, driven by employee pay increases amid cost of living pressures. Still, the overall slowdown in cost growth contributed to a slight increase in average prices charged in May, remaining unchanged from April’s two-year low.