Egypt’s input cost inflation slowed to a 38-month low in May, supporting the country’s non-oil private sector as cooling inflationary pressures spurred a near-stabilization in demand conditions. Egypt neared the growth territory in May as business activity dropped at the slowest rate since July 2023, while firms raised hiring amid growing confidence that sales will begin to improve.
The headline seasonally adjusted S&P Global Egypt Purchasing Managers’ Index (PMI) rose from 47.4 in April to 49.6 in May, reaching its highest level since August 2021 and just below the 50.0 growth benchmark.
“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,” stated David Owen, senior economist at S&P Global Market Intelligence.
Inflation pressures ease
Lower exchange rates and a rise in currency availability supported the decline in Egypt’s purchase price inflation, which declined to its lowest level in four years. However, firms raised concerns over the increase in wage cost burdens. Despite that, the overall improvement in Egypt’s non-oil sector caused only a slight increase in companies’ average prices for the second month in a row.
After Egypt implemented policy measures to improve currency availability in March, firms witnessed greater price stability and stronger confidence. Therefore, new business levels fell at the slowest rate since September 2021, while new export orders increased for the second time in three months amid rising foreign demand. Egypt’s manufacturing, wholesale and retail sectors saw further declines. However, the services and construction sector saw improvement in May.
“Ongoing downturns in industries such as manufacturing and wholesale and retail show that the recovery is still lopsided and may take more time to spread across the rest of the economy,” added Owen.
Read: Arab economies projected to grow by 3.3 percent in 2024 as inflation declines: Report
Business confidence rises
Business confidence rose in Egypt’s 12-month outlook as firms expected economic conditions to strengthen. This encourages firms to increase their staffing numbers for the second time in three months. In addition, input cost inflation across Egypt’s non-oil economy dropped for the third month in a row in May which had a positive impact on currency availability and prices of imports.
Despite improving price conditions, companies struggled with a strong level of wage inflation in May. Salary costs rose at one of the fastest rates in three-and-a-half years amid cost-of-living pressures.
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