The PMI is a composite gauge that tracks the operating conditions in non-oil private sector economies.

The latest index figures show that sales moved slightly closer to stabilisation and the overall drop in business output was the softest recorded since February, said IHS.

The index revealed that firms became more confident about future output in May as expectations rose to levels unprecedented in the past three years. 

Despite the positive indicators, the PMI saw further deterioration in business conditions across Egypt’s non-oil sector in May, marking the third consecutive drop in five months, according to IHS Markit.

The drop extends the downturn witnessed in the sector since the end of 2020, IHS Markit added. 

Furthermore, the index signalled a sixth consecutive monthly decline in the health of the non-oil sector, led by further decreases in output and new businesses.

However, the decrease in May was the softest recorded in three months, as reports of weak demand were partially offset by improvements in market conditions in some areas of the Egyptian economy.

Meanwhile, new order inflows fell for the sixth month in a row, but to the least level since February.

“Customer demand was weakened by the COVID-19 pandemic. That said, there was some positivity from export orders which rose solidly. Despite output remaining weak, there was notable optimism among Egyptian companies for the year ahead, as the outlook for business activity improved to the strongest since February 2018. A recovery in market conditions from the pandemic was commonly seen as a key driver of growth over coming months,” IHS explained.

The index demonstrated that new input purchases in Egypt’s non-oil sector dropped, driven by weak demand in May, although the latest decline was the softest seen in the past six months.

IHS noted that there is a sign that some companies had started to rebuild their stocks, with overall inventories pushed closer to stabilisation after a four-month contraction.

It said that input shortages and higher freight costs increased purchase prices, which rose at the fastest pace since September 2019, following April's recent peak.

“Several firms passed these costs onto their customers during the month, although others opted to absorb input prices in order to keep their charges low. As a result, output prices rose only modestly,” stated IHS Markit.