The headline, seasonally adjusted PMI fell to 49.2 in August from 49.5 in July, remaining below the 50 neutral mark for the sixth consecutive month.
While this indicates a deterioration in business conditions, the contraction was less severe than the survey’s long-run average of 48.2 since the PMI-related data collection began in 2011.
Reasons behind output downturn
Non-oil companies reported a sixth consecutive month of falling output and new orders, with declines accelerating slightly from July but remaining slower than historical averages.
Respondents attributed the downturn to subdued customer demand, ongoing inflationary pressures, and uncertainty over the broader economic outlook.
The report noted that activity fell across all monitored sectors, while inflation concerns persisted as Egypt’s official annual consumer price index (CPI) slowed to 13.9 percent in July, down from higher 2024 levels.
Input costs ease, margins improve
Despite soft demand, companies reported one of the weakest rates of input price inflation in more than four years.
Operating expenses rose at their slowest pace since March, helping narrow the gap between input and output price inflation.
Prices charged by businesses increased at their fastest rate since May, providing some relief to margins.
Where cost increases were observed, companies cited higher import prices and rising staff salaries as factors offsetting the increase in living costs.
Hiring continues, purchases fall
Employment levels rose for a second consecutive month in August, following the first expansion in nine months during July.
However, hiring was modest as companies remained cautious about future demand.
Purchasing activity continued to decline for the sixth month in a row, leading to a further reduction in inventories. This contributed to "shorter supplier delivery times" for the first time since March.
The S&P Global Egypt PMI is based on responses from around 400 private-sector companies, weighted across five key components: new orders (30 percent), output (25 percent), employment (20 percent), suppliers’ delivery times (15 percent), and stocks of purchases (10 percent).
Readings above 50 indicate improvement, while readings below 50 indicate contraction.
“The Egypt PMI data signalled another dip in business conditions in August, although the rate of contraction was relatively soft compared to historical trends. Employment was also up for the second consecutive month, after a lack of hiring in the first half of the year,” said David Owen, a senior economist at S&P Global Market Intelligence.
He added that persistent inflationary pressures appear to be a key factor holding back company sales and output projections over recent months.
"However, the latest PMI data signalled that business cost pressures were at one of their lowest levels since early 2021. If this can be sustained and passed onto customers in the form of lower prices, firms could see client appetite stage a recovery,” Owen stated.
Cautious outlook
Despite signs of cost stabilization, the report showed that optimism among non-oil firms remained muted, with confidence levels broadly unchanged from July and only marginally above June’s record low.
The findings underscore ongoing challenges for Egypt’s private sector as companies navigate slowing demand, tight market conditions, and persistent inflation pressures, even as cost trends improve.
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