Egypt’s Non-Oil Private Sector Contracts Slightly

Egypt’s non-oil private sector saw a slight contraction in September, reflecting persistent economic headwinds and a sharp decline in new orders, according to the latest S&P Global Purchasing Managers’ Index (PMI) report.

The headline PMI reading fell to 48.8 in September from 49.2 in August, marking the lowest level in three months and remaining below the 50-point threshold that separates growth from contraction.

The dip was primarily driven by a steep drop in new business, which declined at the fastest rate in five months. Weaker demand, rising prices, and wage pressures were cited as key contributors to the fall in sales, with many firms reporting subdued customer spending and shrinking order books.

“While companies continue to work hard to attract new business in an overall difficult environment, they may take some comfort from the easing of input cost inflation,” said David Owen, Senior Economist at S&P Global Market Intelligence.

Employment levels were largely unchanged in September, ending a short-lived uptick in hiring that had persisted for two months. Most firms surveyed indicated no notable changes in workforce numbers.

On the external front, export sales fell for the tenth consecutive month, recording their sharpest decline in three years. This prolonged weakness in foreign demand has added further pressure on private sector activity, particularly in manufacturing and services reliant on international clients.

Despite the subdued environment, some firms reported a rise in inventory levels for the first time since May. The increase in stockpiles was seen as a precautionary measure, as companies opted to retain more input materials amid uncertain supply conditions and ongoing cost volatility.

There was a notable divergence in cost trends across the sector. The input cost inflation rate fell to its lowest since March, helped by an appreciation of the Egyptian pound against the U.S. dollar, easing the burden on imported goods and materials.

However, staff costs rose at the fastest pace since May 2024, driven by rising living expenses and recent adjustments to Egypt’s minimum wage. This suggests that companies may continue to face margin pressures even as input costs show signs of cooling.

Business sentiment also took a hit, with future output expectations for the coming 12 months falling to one of their lowest levels on record. Concerns over inflation, political uncertainty, and weak demand have cast a shadow over recovery prospects in the non-oil private sector.

The September data underscores the fragile state of Egypt’s private economy, which remains burdened by inflationary pressures, a cautious consumer base, and persistent export challenges, even as the country pursues economic reforms under an IMF-supported program.