Non-oil private sector activity declined at a slower pace in May, with fewer firms reporting cutbacks to customer sales, according to S&P Global’s latest Purchasing Managers Index (PMI) report (pdf) for Egypt. The country’s headline figure rose by 1.0 percentage point from April to 49.5 in May, marking the slowest pace of contraction in three months.

REMEMBER- The all-important 50.0 mark is the threshold separating contraction from growth. Anything above 50 denotes expansion, while anything below indicates contraction. Egypt’s non-oil private sector has now been in contraction for three straight months and has only been in the green for three of the 55 months since November 2020.

New orders and overall output continued to fall during the month, albeit at a slower pace. The new orders sub-index came in at 49.1, up from 47.4 in April, Reuters reports. Output levels also continued to decline at a slower pace than the previous month, with the output sub-index rising to 49.5 from 47.4 in April. Firms that were surveyed attributed the continued decline in output levels to a decrease in order book volumes amid weaker customer demand.

Firms’ input purchases continued to drop, which survey panelists attributed to the lower levels of new work as well as an effort to ensure that stocks “remained streamlined.” The decline was a “modest” one but was the fastest since last October. Total employment saw a decline for the fourth consecutive month; however, job losses remained mild during the month, with firms mostly opting not to replace voluntary leavers.

Meanwhile, input costs rose at their highest pace in five months, with the acceleration driven by a rise in purchase prices for items like fuel, cement, and paper. Firms also cited volatile exchange rates (particularly with the USD) as a factor for the rise in input costs. This reflected in output prices this time around, with selling prices increasing at their highest level in seven months. “Companies were particularly hit by an increase in purchasing prices, leading them to pass on at least part of this increase to customers. Uncertainty in currency markets and concerns towards future global trade conditions amid US tariffs were noted as factors behind higher supplier prices," S&P Global Senior Economist David Owen said.

REMEMBER- The Oil Ministry’s fuel pricing committee raised vehicle fuel prices by 11.8-14.8% in April, in what was the government’s first fuel price hike since October 2024. Analysts we spoke to at the time agreed that the hike will add to inflationary pressures — and even push up the headline figure.

But despite everything, businesses are growing slightly more hopeful. “When assessing the 12-month outlook, non-oil businesses in Egypt were slightly more upbeat compared to April, although the level of optimism remained weak by historical standards. Some firms indicated that stubborn price pressures and low demand had weighed on output expectations,” the report reads.

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