Egypt’s non-oil private sector stays in expansion territory for second consecutive month

Egypt's non-oil private sector experienced a second consecutive month of expansion in February, although at a slightly reduced pace, according to S&P Global's latest Purchasing Managers' Index (PMI) report. This marks the first time in over four years that Egypt has seen back-to-back improvements in business conditions. The headline PMI figure dipped to 50.1 in February, down from January's 50.7, which had been a 50-month high. Notably, any figure above 50 indicates expansion.

S&P Global Senior Economist David Owen highlighted the positive start to the year, stating that "Coupled with January's upturn, the data reflects the best opening two months of the year in the survey's history." This suggests a notable improvement in Egypt's business environment.

Input cost pressures remained relatively moderate compared to the highs seen in 2024, signaling that "inflation is likely to continue its downward trend, in the near-term at least," according to Owen. While some businesses reported increased costs due to a stronger US dollar, this was partially offset by a decline in staff costs. However, the manufacturing and construction sectors experienced more pronounced cost pressures. In February, selling prices increased at a gradual rate, as businesses aimed to "limit the pass-through of higher cost burdens to clients."

The employment market presented a mixed picture, with employment decreasing for the third time in four months. Businesses faced challenges in retaining staff and hiring new workers.

Overall business sentiment in Egypt remained subdued. Firms' expectations for business activity over the next 12 months fell to their lowest level since November, with only 5% of surveyed businesses expressing optimism about future output trends. Owen attributed this to "economic and geopolitical risks continue to loom large, contributing to another month of subdued expectations for the year ahead."

The growth in new orders was primarily driven by "recovery of market conditions and client demand." However, the slowdown from January was attributed to a decline in manufacturing orders, which slightly impacted overall performance.

HC Securities' Heba Monir provided additional context, stating, "We can’t call it the beginning of a trend just yet. It doesn’t mean we’ve emerged from the bottleneck, but it does indicate that firms have been performing well despite higher costs of raw materials and input prices. The improvement is generally coming from higher consumer spending, which could both be driven by softening inflationary pressures and seasonal factors — but for the number to sustainably stay past the 50.0 mark, it would have to come through interest rate cuts and a recovery in consumer spending."