File Photo: Tailors sewing at the Marie Louis textile clothing and textile factory in the 10th of Ramadan city, about 60 kms north of Cairo. AFP
The headline PMI reading declined to 46 in June from 47.1 in May, marking the sixth consecutive month in 2026 that the index has remained below the neutral 50 threshold separating growth from contraction.
The June reading signalled a significant deterioration in business conditions across the non-oil private sector.
The index reading coincided with GDP growth dropping to around 3.8 percent at the end of the second quarter of 2026, which ends in June, down from five percent seen during the same period in 2025. According to S&P Global Senior Economist David Owen, the “Middle East conflict has exacted a toll on the domestic non-oil sector.”
The report comes as Egypt continues efforts to expand private-sector participation in the economy under its reform programme supported by the International Monetary Fund (IMF).
The fund reached a staff-level agreement with the Egyptian authorities on the seventh review of the country's Extended Fund Facility (EFF) and the second review of the Resilience and Sustainability Facility (RSF).
Once approved, Egypt is expected to receive about $1.5 billion under the EFF and around $136 million under the RSF.
Demand continued to weaken in June, with new orders falling at the fastest pace since November 2022 because of clients' liquidity constraints, shortages of raw materials, slower supply chains, and rising prices that "deterred client spending," Owen said.
The Egyptian pound remains about EGP 1, or 2.1 percent, weaker against the US dollar than its pre-conflict level of EGP 47.99.
Around 27 percent of surveyed companies reported lower sales, while only 11 percent recorded higher sales, resulting in a sharp decline in business activity for the fifth consecutive month.
Purchasing activity also declined in June, although firms increased their inventories to build stock reserves as a safeguard against potential price shocks and continued supply disruptions.
Supplier delivery times lengthened, although at a slower pace than in May, reflecting shortages of raw materials, shipping disruptions in the Strait of Hormuz, which has become a major pressure point for global trade, and higher fuel prices.
“Further easing appears possible should global energy prices decline and regional tensions cool, which would add support to the improved outlook for output seen over the past couple of months,” Owen said.
External demand also weakened, mainly because the Middle East conflict continued to disrupt regional trade.
Inflationary pressures remained elevated but eased in June compared with May. Both input cost inflation and output price inflation moderated significantly, providing some relief to businesses despite higher fuel and raw material costs linked to the regional conflict.
Egypt’s inflation rate rose by 1.4 percent month-on-month in May 2026.
Whilst businesses continued to face heightened material prices, the rate of increase in overall purchasing costs softened considerably from the previous month.
Employment continued on a downward trajectory, but the rate of jobs lost eased slightly from May, driven by voluntary staff departures rather than active layoffs.
Companies also reported the second-fastest increase in staff costs and wage pressures since January 2018, following the record increase recorded in May.
Business confidence continued to improve, rising above levels seen earlier in the year, although it remained below May's reading. Companies remained optimistic that regional disruptions would ease and that government support would strengthen in the coming months.
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