Non-oil sector PMI exceeds 50-point threshold for 1st time in 5 months

Ahram Online , Tuesday 4 Feb 2025

The non-oil sector's Purchasing Managers' Index (PMI) exceeded the neutral threshold of 50 points for the first time since August 2024, increasing from 48.1 points in December 2024 to 50.7 points in January 2025, according to an S&P Global report on Tuesday.

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File Photo: Tailors sewing at the Marie Louis textile clothing and textile factory in the 10th of Ramadan city, about 60 kms north of Cairo. AFP

 

This is also the second time the PMI has surpassed the neutral 50-point mark since 2020.

Despite this development, the report noted that this reading signals a modest expansion in business activity.

This follows a prolonged period of decline, suggesting a positive shift in Egypt’s non-oil economy.

The PMI, calculated based on new orders (30 percent), output (25 percent), employment (20 percent), supplier delivery times (15 percent), and stocks of purchases (10 percent), signalled the most significant growth in over four years.

Increases in output and sales volumes primarily drove the expansion.

Key factors behind this improvement included better economic conditions and a decline in inflationary pressures, which helped lift output and sales at the start of 2025.

This was accompanied by reduced cost pressures, which fell to an eight-month low.

Notably, inflation in Egypt showed signs of easing. The Central Agency for Public Mobilization and Statistics (CAPMAS) reported a drop in annual headline inflation from 25 percent in November to 23.4 percent in December 2024.

The Central Bank of Egypt (CBE) also reported a decline in core inflation, which fell for the fourth consecutive month to 23.2 percent in December, compared to 23.7 percent in November 2024.

While most sectors reported growth, including manufacturing, construction, and wholesale and retail, the services sector experienced a downturn in sales.

The PMI report indicated that some cost pressures remained, particularly from the strengthening US dollar, although material prices showed some reduction, especially in the construction sector.

On 6 March 2024, the CBE implemented the fourth phase of fair local currency pricing, increasing the dollar exchange rate from EGP 30.9 to EGP 49.56.

In November 2024, Prime Minister Mostafa Madbouly noted that since the country adopted a flexible exchange rate in March, the dollar's value has fluctuated by four to five percent, varying between EGP 47 and EGP 49 per dollar.

In response to increased output, non-oil businesses modestly raised their output prices in January, which marked the slowest increase in more than four years.

 

Employment across the non-oil economy remained stable after two months of workforce reductions.

While some firms increased hiring in response to higher sales, reductions in other areas offset this growth.

Despite the positive shift in business conditions, companies' outlooks for future activity remained cautious, and expectations for growth declined to historically low levels.

The January PMI data suggest a potential recovery for Egypt’s private sector economy, signalling that the worst of the recent economic downturn may have passed.

However, firms are still hesitant to make large-scale forecasts, reflecting the ongoing uncertainty in the economic environment.

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