Cairo – Mubasher: The Egypt Purchasing Managers’ Index (PMI) rose in May 2024 to its highest level since August 2021, reaching a point close to the growth threshold of 50, as cooling inflation since early 2024 encouraged demand stabilisation.

The seasonally adjusted PMI, a gauge of operating conditions in Egypt’s non-oil private sector, climbed to 49.60 last month from 47.40 in April, according to a report by S&P Global.

Firms widely attributed the strong move toward stability to softening price pressures. After March measures aimed at improving currency availability, companies noted greater stability and confidence.

Subsequently, new orders declined at the slowest pace since September 2021, while new export orders increased for a second time in three months on rising foreign demand.

Business activity fell at a moderate pace in May, reflecting a mixed sector performance. Manufacturing and wholesale/retail posted declines versus services and construction growth.

Confidence in the one-year outlook ticked up as hopes for strengthening economic conditions grew. Improved prospects encouraged hiring and slower declines in input purchasing.

Input cost inflation across the non-oil economy dropped for a third month in May, reflecting the sustained positive impact of improved currency availability.

Many linked this to a lower dollar exchange rate locally, leading to falling imported goods prices. Notably, purchase price inflation slid to a four-year low, with manufacturing and construction even recording outright cost decreases.

However, wage inflation remained relatively strong in May. Salary costs rose at one of the fastest rates in three-and-a-half years, typically linked to pay increases amid living-cost pressures.

Still, the general slowing of cost rises paved the way for another mild increase in average charges last month, unchanged from April’s two-year low.

David Owen, Senior Economist at S&P Global Market Intelligence, said: "May's PMI reading of 49.60 was the first indication that the rapid cooling of price pressures is starting to boost the Egyptian non-oil private sector.”

“The output and new orders metrics closed most of their gaps to the 50.0 growth threshold, with the services and construction sectors even seeing a turnaround in activity as comments suggest that greater price stability fuelled client spending,” Owen added.

He stated: "With input cost inflation easing further, the data nonetheless signals a promising outlook for Egyptian businesses. 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."