A man working in a local chocolate factory. Reuters
The PMI increased to 50.1 from January’s 50.7, remaining just above the neutral 50.0 threshold separating growth from contraction.
This marked the first back-to-back expansion in the non-oil business sector since December, signalling a fragile but noteworthy recovery.
New orders continued to rise, driven by improving market conditions and stronger client demand.
However, manufacturing faced challenges, with a slowdown in order growth, tempering the sector's overall momentum and preventing a more substantial recovery.
David Owen, senior economist for economic indices at S&P Global Market Intelligence, clarified the mixed nature of the data: “Coupled with January's upturn, the data reflects the best opening two months of the year in the survey's history.”
“On the other hand, economic and geopolitical risks continue to loom large, contributing to another month of subdued expectations for the year ahead,” Owen added.
Muted price pressures offer relief
Cost pressures remained historically mild despite a slight uptick in input price inflation compared to January.
Non-oil firms saw purchase costs rise, partly due to a strong US dollar, but restrained wage growth offset some of the impact. Selling prices increased modestly, reflecting firms’ conservative approach to passing higher costs onto consumers.
This muted inflationary environment contrasts sharply with the elevated price pressures that defined much of 2024.
The Central Bank of Egypt (CBE) noted steady declines in core inflation, which fell to 23.2 percent in December, offering hope for sustained economic stabilization.
Persisting employment and output challenges
According to the report, while firms ramped up purchasing activity to capitalize on improving demand, employment figures slipped for the third time in four months.
Companies reported difficulties retaining and hiring staff, with voluntary departures contributing to workforce reductions.
Meanwhile, output remained stable after a modest boost in January, signalling that businesses are tentatively trudging amid ongoing uncertainties.
Moreover, a continued volatile exchange rate, geopolitical risks, and cautious business sentiment weigh heavily on growth prospects. Only five percent of firms expressed optimism about future output, the lowest confidence level since November 2024.
Long road to recovery
The February report builds on a broader trend of gradual recovery since late 2024, when the PMI first climbed above the 50.0 thresholds in August after nearly four years of contraction.
This resurgence reflects efforts by the Egyptian government to enhance private sector participation in the economy, a key pillar of its $8 billion loan agreement with the International Monetary Fund (IMF).
Egypt’s economic performance has been on a rollercoaster over the past year. From a prolonged downturn in early 2024, when PMI figures hovered just below the 50.0 mark amid a foreign currency crisis, to gradual stabilization in late 2024, the trajectory has been cautious optimism.
Efforts to stabilize the Egyptian pound and reduce inflation have paid off, with key reforms and flexible exchange rates playing pivotal roles. Still, the recovery remains uneven, with sectors such as construction and manufacturing grappling with higher material costs and subdued demand.
It is worth noting that Egypt aims to increase private sector contributions to 50 percent of its economic activity by the end of 2025 in line with its commitments under the $8 billion loan programme with the IMF.
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