Egypt’s Private Sector Slump Deepens: PMI Reveals Record-Low Confidence Amid Geopolitical Jitters

Cairo, Egypt – Egypt’s non-oil private sector faced a deepening downturn in June, as business activity contracted at a faster pace, battered by weakening demand and a sharp pullback in purchasing, according to the latest S&P Global Purchasing Managers’ Index (PMI) report released Sunday.

The headline PMI, a key barometer of the nation’s economic health, slid to 48.8 in June from 49.5 in May. This marks the fourth consecutive month the index has remained below the critical 50.0 threshold, which separates economic growth from contraction, signaling a sustained period of strain for businesses.

Demand Slump Drives Contraction

The primary drivers behind the decline were accelerating contractions in both output and new orders. The data revealed a significant drop in client demand, which in turn forced companies to scale back production. This climate of caution led to a dramatic reduction in purchasing activity, which plummeted at its steepest rate in 11 months as firms grew increasingly wary of holding excess stock.

“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,” commented David Owen, an economist at S&P Global Market Intelligence.

Confidence Hits Rock Bottom

Perhaps the most concerning aspect of the report was the sharp deterioration in business confidence. Future activity expectations for the coming year sank to the lowest level ever recorded for the month of June.

This record-low optimism reflects deep-seated concerns among business leaders. According to the report, firms are grappling with subdued hopes for a rebound in order books and are increasingly worried that regional geopolitical risks could trigger more severe economic disruption.

The weak outlook also translated to the labor market, with employment in the non-oil sector falling for the fifth month in a row. While the rate of job shedding was described as “fractional,” the persistent decline underscores the pressure firms are under.

A Glimmer of Relief on the Inflation Front

Despite the gloomy headline figures, there was a notable silver lining. Input cost inflation softened for the second consecutive month, reaching its lowest point since March. This easing of price pressures allowed companies to raise their own output prices at a slower rate, offering some much-needed relief to businesses and consumers who have been battling persistent inflation.

However, this small positive was overshadowed by the broader challenges. With demand weak and confidence at a historic low, Egypt’s non-oil private sector faces a difficult path ahead as it navigates both domestic economic headwinds and a volatile external environment.