Egypt’s non-oil private sector edged closer to stabilization in May, with the latest S&P Global Purchasing Managers’ Index (PMI) reading rising to 49.5, up from 48.5 in April and marking the mildest deterioration in business conditions in three months. Although the index remains below the 50.0 threshold that separates growth from contraction, the latest figures point to a gradual recovery in the private sector, supported by softer declines in output and new orders.
According to S&P Global’s survey, output and new orders continued to decline, but at a slower pace compared to April, as fewer companies reported cutbacks in customer sales. The output sub-index improved to 49.5 from 47.4, while the new orders sub-index rose to 49.1 from 47.4, indicating a smaller proportion of firms reporting declining customer sales.
Despite these encouraging trends, the broader economic environment remained difficult. Companies continued to scale back operations, reducing purchasing activity at the fastest rate in seven months and trimming their workforce for the fourth consecutive month. Employment declines were mostly modest, often attributed to non-replacement of departing staff rather than mass layoffs.
Input cost inflation surged to a five-month high, driven by volatile exchange rates, particularly against the US dollar and rising supplier prices. Fuel, cement and paper were among the key cost drivers. Consequently, firms raised selling prices at the fastest pace since October 2024, reversing a period of price stagnation in April. However, wage growth remained modest, indicating that inflationary pressures were primarily cost-driven rather than wage-led.
“Although many of the key PMI metrics continued to indicate a deterioration in business conditions in May, the overall pace of decline was not as sharp as in April and softer than the survey’s historical trend,” noted David Owen, Senior Economist at S&P Global Market Intelligence. He highlighted renewed growth in the manufacturing sector as a positive sign.
Business sentiment saw a slight uptick from April but remained historically subdued, reflecting ongoing concerns over domestic inflation, global trade uncertainty and currency instability.
Still, Egypt’s labor market showed resilience, with the official unemployment rate falling to 6.6 percent in 2024, a 0.4 percentage point improvement from the previous year, according to the Central Agency for Public Mobilization and Statistics (CAPMAS). Prime Minister Mostafa Madbouly also reported a further drop to 6.4 percent in Q4 of FY 2024/2025, one of the lowest levels in two decades.
The May PMI, which stands above the long-term average of 48.2, signals that Egypt’s non-oil economy is inching toward stabilization. For policymakers and investors, the data underscores a fragile yet discernible path to recovery, tempered by inflationary headwinds, cautious hiring and the urgent need to reignite domestic demand without compromising hard-won progress.
