Egypt's Non-Oil Sector Shows Signs of Recovery

In June, non-oil companies in Egypt saw a growth in sales for the first time in nearly three years, as indicated by the Purchasing Managers’ Index rising to 49.9 from 49.6 in May. This increase, just below the crucial 50 mark, was credited to government policies that alleviated price pressures, signaling a glimpse of economic stability in the country. Over the past few years, Egypt's non-oil sector has faced challenges stemming from various economic shocks, including issues in neighboring Gaza, currency fluctuations, and disruptions in the Suez Canal.

The most recent PMI data reveals that Egypt's non-oil economy concluded the first half of 2024 on a positive note, with the headline PMI reaching 49.9 and new order volumes increasing for the first time in almost three years. Output levels in the country declined at the slowest rate in nearly three years, while input purchases rose for the first time since December 2021. Despite a slight uptick in input cost inflation in June, selling charges increased modestly. Business intakes at non-oil firms in Egypt also rose for the first time since August 2021, hinting at a potential path to recovery.

Although output levels continued to decrease on average, they were on the verge of growth territory, supported by the uptick in input purchases. If sales and purchases continue to climb in the latter half of the year, companies are likely to expand their output. Price pressures remained lower compared to the first quarter of the year, which is a positive development amid the country's foreign currency crisis.

In June, the manufacturing and services sectors in Egypt witnessed a surge in new orders, while the construction, wholesale, and retail industries experienced a decline. Employment numbers remained relatively stable, with some firms increasing their workforce due to rising sales, while others reported layoffs and not replacing departing employees. Inflationary pressures on businesses were subdued in the second quarter, with firms attributing the rise in input prices to market price volatility rather than a sustained inflation trend.

The recent uptick in sales and new orders in Egypt's non-oil sector signals a potential turnaround for the country's economy. With government policies easing price pressures and various industries showing signs of recovery, there is hope for continued growth in the coming months. Despite ongoing challenges, such as fluctuations in currency and disruptions in key sectors, the resilience of Egypt's non-oil companies bodes well for the future economic stability of the nation.