Egypt’s non-oil private sector declines in March despite cooling inflation
Updated 4/3/2025 8:34:00 AM
Arab Finance: Egypt’s non-oil private sector fell back into contraction in March after experiencing improved business conditions in the first two months of the year, according to the latest report of S&P Global Egypt Purchasing Managers’ Index (PMI).
The report showed that weaker demand led firms to scale back activity and purchasing, resulting in a further decline in employment.
The headline PMI dropped to 49.2 in March from 50.1 in February, marking its lowest level in three months. A reading below 50.0 signals a deterioration in business conditions, indicating a mild downturn as the first quarter of 2025 ended.
The decline was driven by reduced new order intakes, with both domestic and international demand slowing.
While the overall drop in new orders was marginal compared to historical trends, it was enough to prompt companies to cut spending and operations.
The construction sector remained a bright spot, showing robust growth in output and new work. However, this contrasted with weaker performance in manufacturing, wholesale, and retail, where demand remained subdued.
Alongside the contraction, inflationary pressures eased significantly. March recorded the slowest pace of input price inflation in nearly five years, with purchase prices rising only modestly.
The stabilization of the Egyptian pound against the US dollar was cited as a key factor in mitigating inflation. Staff costs also declined for the second consecutive month, contributing to the lower inflationary trend.
As a result, firms raised their selling prices only slightly, continuing a pattern observed throughout the first quarter. The overall increase in selling prices was the lowest in four years, reflecting a more stable pricing environment.
"Firms will be particularly buoyed by the improved picture for inflation. Although headline inflation plummeted from 24% to 12.8% in February mostly due to base effects, a softening of input cost increases according to the March PMI data suggest there could be further reductions going forward," Senior Economist at S&P Global Market Intelligence, David Owen, stated.
Looking ahead, business sentiment remained weak, with output expectations falling to one of the lowest levels in the survey’s history.
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