Egypt’s non-oil private sector economy moved closer to growth in May, reaching a 33-month high in the Purchasing Managers’ Index (PMI) released on Tuesday as inflationary pressures continued to cool.
At 49.6, the headline PMI for May rose from 47.4 in April, marking its highest level since August 2021. The PMI index, compiled by S&P Global, remained just below the 50.0 mark that separates growth from contraction.
The easing of inflation, attributed to improved currency availability and lower exchange rates, was a key factor in the positive trend. Input costs rose at their weakest pace since March 2021, with purchase price inflation falling to a four-year low. This resulted in only a slight increase in average prices charged by companies for the second consecutive month.
“May’s PMI reading of 49.6 was the first indication that the rapid cooling of price pressures is starting to boost the Egyptian non-oil private sector,” said David Owen, Senior Economist at S&P Global Market Intelligence. “The output and new orders metrics closed most of their gaps to the 50.0 growth threshold, with the services and construction sectors even seeing a turnaround in activity as comments suggest that greater price stability fuelled client spending.”
Despite the overall positive trend, the recovery remains uneven, with manufacturing and wholesale & retail sectors still experiencing downturns. However, the easing of input cost inflation, combined with a mild increase in selling prices, is expected to boost customer confidence and encourage spending.
Business confidence also improved in May, leading to increased hiring for the second time in three months. Purchases of inputs declined at the slowest rate since February 2022, further indicating a positive outlook for the Egyptian economy.
The easing of inflation was attributed to policy measures implemented in March aimed at improving currency availability. Businesses reported greater price stability and stronger confidence, leading to a slower decline in new business levels since September 2021. New export orders also increased for the second time in three months, driven by rising foreign demand.
While the rate of purchase price inflation fell to a four-year low, businesses faced a relatively strong level of wage inflation in May, driven by staff pay rises amid cost-of-living pressures. Despite this, the overall slowing of cost increases contributed to a marginal increase in average prices charged in May, remaining unchanged from April’s two-year low.
