Lowest level since January 2023... Egypt's private sector contraction worsens

Written by Ziad Abdel Fattah:

The Purchasing Managers' Index (PMI) revealed that Group Global P&S reported on the worsening contraction of the non-oil private sector's performance in Egypt during June 2026. The headline index recorded 46.0 points, down from 47.1 points in May, marking the lowest reading since January 2023. This continues to be below the neutral level of 50 points for the sixth consecutive month, indicating a noticeable deterioration in business conditions.

The report explained that the decline in economic activity was due to weak domestic and external demand, in addition to continued supply chain disruptions and rising operating costs, factors which were exacerbated by the repercussions of the conflict in the Middle East, negatively impacting production, sales, purchases, and employment.

Purchasing Managers' Index reveals a drop in new orders

The index indicated that new orders recorded their sharpest decline since November 2022, with approximately 27% of participating companies reporting a decline in sales during June, compared to only 11% that reported an improvement. Companies attributed this decline to customers’ liquidity issues, shortages of raw materials, and slow supply chains, as well as ongoing price pressures, while export orders were also affected by a decline in regional trade due to geopolitical tensions.

Commercial activity declined for the fifth consecutive month, marking the fastest pace of contraction since the beginning of 2023. Meanwhile, companies continued to reduce their workforce, albeit at a slower pace than the previous month. It was clarified that the decline was mainly due to natural attrition of the workforce rather than widespread layoffs.

On the procurement front, the report showed a continued decline in corporate purchasing activity, despite many companies opting to increase inventories as a precautionary measure in anticipation of sustained supply chain disruptions and rising prices.

Supplier delivery times continued to rise due to raw material shortages, shipping disruptions in the Strait of Hormuz, and rising fuel prices, although the increase was less severe compared to May.

Conversely, the report pointed to some positive indicators on the inflation front, as the rates of increase in input costs and selling prices slowed down compared to the near-record levels seen in May. However, companies continued to face pressures resulting from the rise in fuel and raw material prices, in addition to recording the second-fastest increase in wage costs since January 2018.

David Owen, chief economist at Global P&S Market Intelligence, said that the decline in the Purchasing Managers’ Index to 46.0 points reinforces expectations of a slowdown in Egypt’s economic growth during the second quarter of the year, explaining that the historical relationship between the index and gross domestic product (GDP) indicates that the current reading corresponds to a growth rate of approximately 3.8%, compared to approximately 5% during the same period last year.

He added that the conflict in the Middle East has caused clear damage to the non-oil private sector, leading to the largest drop in new business in more than three and a half years. At the same time, he pointed out that the easing of inflationary pressures during June has provided companies with some relief, especially with the slower pace of increase in purchasing costs compared to the previous month.

He explained that the continued stability of energy prices and the decline in regional tensions could contribute to improving production expectations in the coming months.

According to the report, current PMI readings indicate continued pressure on non-oil private sector activity, even though future business expectations remain better than at the start of the year, supported by hopes of easing geopolitical tensions and increased government support, although optimism levels have slightly declined compared to May.