Egypt’s Non-Oil Private Sector Contracts Further in June as the PMI Falls to 46.0, but Cost Pressures Ease
Egypt’s non-oil private sector weakened again in June, with the headline S&P Global Purchasing Managers’ Index falling to 46.0 from 47.1 in May, its lowest reading since January 2023 and a sixth consecutive month below the 50.0 mark that separates growth from contraction. The survey pointed to a broad softening in demand and output, though it also carried a clear bright spot: the cost pressures that have squeezed businesses through the spring eased markedly.
A PMI below 50 signals contraction, and June’s 46.0 is the weakest print in nearly three and a half years. The reading extends an uninterrupted run of sub-50 months that began in January, and it deepened rather than stabilised, falling 1.1 points from May. The index’s shortfall below the 50.0 neutral mark widened from 2.9 points in May to 4.0 points in June, our calculation, a deeper contraction rather than a levelling off. New orders were the main drag, declining at the fastest pace since November 2022 as firms reported softer domestic demand, with roughly 27 percent of surveyed companies citing weaker sales against only about 11 percent reporting stronger orders. Output fell for a fifth straight month, and firms continued to trim headcount, though mostly through natural attrition rather than active layoffs, and at a slightly slower pace than in May.
The value in the detail is what it says about the trajectory. Averaged across the six sub-50 months of 2026, the headline index has run at about 47.7, our calculation, a shallow but persistent contraction rather than a sharp collapse, and June’s 46.0 sits below that average, showing momentum still tilting down. On a year-over-year basis the index is about 2.8 points weaker than the 48.8 recorded in June 2025, underlining that the non-oil economy has lost ground over the past twelve months. S&P Global’s own model reading translated the June survey into annual GDP growth cooling toward about 3.8 percent by the end of the second quarter, down from a pace nearer 5 percent a year earlier.
The clearest positive was on prices. Input cost inflation eased considerably from May’s near-record highs, and firms passed on smaller increases, with output-price inflation cooling in step. That matters because stubborn input costs had been one of the survey’s most persistent features through the spring. The one price component that stayed hot was wages, which rose at close to their fastest pace since early 2018, a reminder that labour costs remain a source of pressure even as imported and materials costs recede.
The easing in the survey’s cost gauges lines up with Egypt’s broader disinflation path. Headline urban inflation was 14.6 percent in May, according to the official statistics agency CAPMAS, down from 14.9 percent in April and off the March peak, as earlier fuel-price effects faded. The Central Bank of Egypt has held its overnight deposit and lending rates at 19.00 and 20.00 percent since its May meeting, after delivering a substantial run of cuts over the prior year, and has signalled caution while it waits out fuel and exchange-rate driven volatility. At 19.00 percent, the overnight deposit rate sits about 4.4 percentage points above May’s 14.6 percent headline inflation, our calculation, so real policy rates remain firmly positive and policy restrictive even after the earlier easing. The June inflation print is due on 9 July and will show whether the cooling in business-level costs is feeding through to consumer prices.
David Owen, an economist at S&P Global Market Intelligence, tied the weakness to regional conditions, noting that the survey signalled the steepest decline in new work in over three and a half years and that the PMI at 46.0 lent greater confidence to forecasts of softer second-quarter GDP growth. He also framed the price moderation as genuine relief for firms, adding that further easing was possible if global energy prices fall and regional tensions cool, which would support the improved outlook for future output that businesses have reported over recent months.
Why it matters: A sixth straight month of contraction shows that Egypt’s non-oil economy is still absorbing the drag from softer demand and regional disruption, and the deterioration in new orders points to subdued activity into the third quarter. But the sharp easing in input and output prices is the more forward-looking signal: it reinforces the disinflation trend that has pulled headline inflation into the mid-teens and gives the central bank more room to consider easing later in the year, which would in turn support credit and investment. For Egypt, the report is a reminder that the near-term growth picture is soft while the inflation picture is improving, a combination that shapes the timing of the next stage of monetary easing.
Outlook: The immediate markers are the June CPI release on 9 July and the central bank’s next rate decision, where a continued fall in inflation would strengthen the case for resuming cuts. For the private sector, the key questions are whether new orders stabilise as price pressures fade and whether an easing in regional tensions and energy costs allows the improved expectations firms have reported to translate into a recovery in output.
Sources: S&P Global; Central Bank of Egypt; CAPMAS.
