Finally in the green: Non-oil private sector activity expanded in August for the first time in over three years, S&P Global’s Egypt Purchasing Managers’ Index (PMI) (pdf) report showed. The report pointed to more stable demand conditions thanks to “market recovery amid improved macro-economic factors and rising export business” as an important reason behind activity finally increasing.

It’s been a long time coming: The index rose to 50.4 in August, up from 49.7 in July. The country’s non-oil private sector has been in contraction since November 2020, but has been flirting with the 50.0 mark that separates growth from contraction since May thanks to cooling inflation and growing confidence.

Growth across the board — almost: Demand stability reports encouraged companies to increase their output, expand their inventories, and hire more staff for the second consecutive month. However, weakening client demand resulted in a marginal decline in new orders.

But don’t celebrate yet, inflationary pressures persist: The EGP weakening against the greenback last month pushed input price inflation up for the third consecutive month. The report also pointed to an increase in transport cost — thanks to the latest fuel price hike — and a rise in salaries, explaining that “efforts to pass through higher costs to customers also resulted in an increase in average prices charged.”

“Rising price pressures are another risk — August data signaled the fastest uplifts in costs and charges for five months — which has the potential to limit spending and weaken the market recovery," S&P Global Market Intelligence Senior Economist David Owen noted.

Business sentiment rises to its highest level in years: Businesses had high expectations — their highest since mid-2022 — for future business activity last month.

The news is bolstering growth projections for the country: “Economic growth bottomed out at 2.2% in 3Q FY 2023-2024,” Fitch Solutions' director of MENA country risk Ramona Moubarak wrote, reaffirming the Madbouly government’s growth forecast of 4.2% for the current fiscal year. She pointed to “higher investment, a recovery in the manufacturing sector and a normalization of traffic through the Suez Canal (assuming the war in Gaza ends in H2 2024),” behind her forecast and explained that the high cost of living and issues with the oil and gas sector will prevent the economy from growing even further.

The international press also took note: Reuters | Bloomberg

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