Egypt non-oil private sector shrinks in June due to weak demand: S&P - Economy
Firms also reported a sharp reduction in purchasing activity and a historic low in business confidence heading into the second half of the year.
According to its PMI report on Egypt, S&P Global noted that the country's headline PMI fell to 48.8 in June, down from 49.5 in May, marking the fourth consecutive month below the neutral 50.0 threshold that separates expansion from contraction.
The reading signalled a modest but accelerated decline in overall operating conditions.
'The June PMI data pointed to another mild decline in the health of the non-oil sector, driven by sustained decreases in incoming new orders and output volumes,' said David Owen, senior economist at S&P Global Market Intelligence.
The contraction was driven by faster declines in both output and new orders, with businesses citing weak client spending and a general stagnation in local markets.
The downturn prompted firms to scale back input purchases at the fastest pace in nearly a year, particularly in the manufacturing sector.
Employment also remained under pressure, with staffing levels falling for the fifth consecutive month. While the job cuts were modest, they reflected persistent demand weakness and low expectations for future growth.
'A faster drop in input purchases combined with stalling hiring activity suggests that firms expect demand to remain low and are thereby looking to make cost savings,' Owen added.
The outlook among Egyptian firms deteriorated further, with business confidence for the year ahead slipping to the lowest level ever recorded by the survey. Respondents expressed deep concerns over muted order books and potential geopolitical risks that could intensify economic disruptions.
Despite the broad challenges, cost pressures eased slightly. Input price inflation dropped to a three-month low, contributing to a slower rise in output charges, following a sharp increase recorded in May.
Inventories also flattened after three months of modest growth, while supplier delivery times continued to lengthen slightly amid persistent pressure on logistics.
The June data highlights the ongoing challenges facing Egypt's private sector despite broader macroeconomic reform efforts.
The decline in activity and expectations suggests that business sentiment remains fragile as firms navigate a complex mix of weak domestic demand and uncertain external conditions.
The S&P Global Egypt PMI is derived from a survey of approximately 400 private-sector companies across various sectors, including manufacturing, construction, services, and retail. A reading above 50.0 indicates improvement in business conditions, while a reading below that figure reflects contraction.
In response to the implications of global and regional tensions on the country's economy, the International Monetary Fund (IMF) announced last week that it will complete both the fifth and sixth reviews of the Extended Fund Facility (EFF) $8 billion loan programme by September.
Raising the private sector's share in the Egyptian economy is a cornerstone of this programme.
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