RIYADH: Egypt’s Non-Oil Sector Experiences Sales Growth After Nearly Three Years
In a notable turn of events, non-oil companies in Egypt have recorded sales growth for the first time in almost three years, as evidenced by the Purchasing Managers’ Index (PMI) rising to 49.9 in June from 49.6 in May.
According to S&P Global, this near-50 PMI reading reflects effective government policies that have mitigated price pressures, indicating signs of economic stability in the country.
Egypt’s non-oil sector has faced significant challenges over the past few years, grappling with economic disruptions due to the crisis in neighboring Gaza, currency devaluation, and disruptions in the Suez Canal. David Owen, Senior Economist at S&P Global Market Intelligence, remarked, “Egypt’s non-oil economy ended the first half of 2024 on a high according to the latest PMI data. With the headline PMI reaching 49.9 and total new order volumes rising for the first time in nearly three years, businesses appear to be heading on the road to recovery.”
A PMI reading above 50 generally indicates sector growth, while figures below 50 suggest contraction. The recent report highlighted that Egypt’s output levels fell at the slowest rate in nearly three years, and the volume of input purchases has increased for the first time since December 2021.
Despite a three-month high in June, input cost inflation remained modest, leading to a slight increase in selling prices. For the first time since August 2021, business intake at non-oil firms rose, with more firms reporting improved demand than those experiencing reductions.
“Although output levels continued to fall on average, they were also close to growth territory, as business capacity was helped by a fresh increase in the buying of inputs. If we see further rises in sales and purchases in the second half of this year, firms should have the motivation and need to expand their output,” Owen explained.
Owen also noted the favorable shift in price pressures compared to the severe conditions seen during the first quarter of the foreign currency crisis.
The report further indicated a rise in new orders in the manufacturing and services sectors in June, while a decline was observed in the construction, wholesale, and retail industries. Meanwhile, employment numbers in the Egyptian non-oil sector remained relatively stable, balancing between companies expanding their workforce and those implementing layoffs or not replacing departing employees.
Data from June revealed significant suppression of inflationary pressures on businesses during the second quarter. “While June saw the fastest rise in input prices for three months, firms generally commented that this was due to a high degree of volatility in market prices rather than an accelerating inflation trend,” Owen concluded.
Source: S&P Global
