Egypt's non-oil private sector contracts slightly in September

Egypt's non-oil private sector economy experienced a more pronounced decline in September, with the S&P Global Egypt Purchasing Managers' Index (PMI) dipping to 48.8. This figure, down from 49.2 in August, marks the lowest reading in three months and signifies a continued contraction for the seventh consecutive month.

The downturn was largely driven by a significant contraction in new sales, which saw its steepest fall since April. Surveyed companies attributed this reduction in orders to challenging economic conditions, escalating prices, and increased wage pressures affecting demand.

Consequently, business activity decreased for the seventh month running. The rate of decline accelerated to its strongest level in three months, though it remained moderate overall. Sectors such as wholesale and retail bore the brunt, recording the sharpest drops in sales, output, and purchases. This persistent lack of new work also led to employment growth stalling in September, effectively ending a two-month period of job creation. Many firms reported no change in workforce size, citing reduced necessity for new hires, which contributed to business confidence falling to one of its lowest points in the survey's history.

Despite these challenges, there was a glimmer of positive news regarding input costs. Inflation in input costs eased to its slowest pace in six months, primarily due to the Egyptian pound's strengthening against the US dollar, which positively impacted import prices. However, this was somewhat offset by a notable rise in staff costs, which increased at the fastest rate since May 2024. Businesses, responding to these rising expenditures, continued to increase their own charged prices for the fifth consecutive month, albeit at a slightly slower rate than in August, as they sought to pass higher costs onto customers.

Commenting on the findings, David Owen, Senior Economist at S&P Global Market Intelligence, acknowledged that while companies are grappling with securing new business amidst difficult market conditions, "they can take some comfort from a softening of input cost pressures, driven by the pound’s strengthening against the US dollar over recent months." This persistent trend, with the PMI remaining below the crucial 50.0 neutral threshold for seven straight months, underscores the ongoing contraction within Egypt's vital non-oil private sector.