A man working in a local chocolate factory. Reuters
While still below the neutral 50.0 mark, the reading indicates a marginal decline in operating conditions, with the non-oil private sector nearing a stabilization phase.
The May data also points to a softening of inflationary pressures in Egypt.
After announcing policy measures in March to improve currency availability, firms pointed out greater price stability and stronger confidence during the latest survey period, according to the report.
This contributed to a slower decline in new business levels and an increase in new export orders amid rising foreign demand.
In May, the Central Bank of Egypt (CBE) devalued the Egyptian pound against the US dollar, with the currency losing over 60 percent of its value against the greenback since March.
Since the beginning of 2024, the CBE also hiked key interest rates by a total of eight percent, six percent of which was implemented in an unscheduled meeting on 6 March.
The report noted that input costs increased at the weakest pace since March 2021, signaling a positive trend in inflation.
Purchase price inflation slid to its lowest level in four years although wage cost burdens picked up, which led to only a slight increase in average prices charged by companies for the second consecutive month, it added.
"Aided by lower market exchange rates as currency availability increased, purchase price inflation slid to its lowest level in four years, though there was a concurrent pick-up in wage cost burdens," the report explained.
The May PMI reading of 49.6 was the first indication that the rapid cooling of price pressures is starting to enhance 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 growth threshold, with the services and construction sectors even seeing a turnaround in activity as comments assume that greater price stability fueled client spending," Owen clarified.
So, “ongoing downturns in industries such as manufacturing and wholesale & retail show that the recovery is still lopsided and may take more time to spread across the rest of the economy," he added.
According to Owen, with the further easing of input cost inflation, the data signals a promising outlook for Egyptian businesses.
He explained that purchase costs rose at their slowest rate in four years, leading to only a mild increase in selling prices, which should give customers greater confidence to spend.
Moreover, business optimism also ticked higher, and job levels expanded, indicating that firms are projecting an improvement in economic conditions.
As per the report, confidence towards the 12-month outlook ticked higher in May, as hopes of the companies across the sector that economic conditions will improve grew.
“Improved prospects encouraged companies to increase their staffing numbers for the second time in three months, while purchases of inputs shrank in May at the slowest rate since February 2022,” said the report.
Egypt, with its commitments under the $8 billion loan programme, is working on raising the private sector’s share in its economic activity to reach 50 percent in 2025.
It also seeks to improve the business and investment atmosphere by allowing the private sector to lead the country’s economic growth along with creating more job opportunities.
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