Non-oil private sector hits 3.5-year low in June as conflict weighs on demand

Egypt’s non-oil private sector saw its deepest contraction in over three years in June due to decreased demand following disruptions in regional supply chains. Yet companies have continued to build inventory despite falling sales. The headline S&P Global PMI reading fell to 46.0 in June from 47.1 in May — its lowest since January 2023 and a sixth straight month below the 50.0 growth threshold per the latest survey (pdf). Business activity has now contracted for five consecutive months.

Why it matters: The slump suggests the wider economy is cooling. Based on historical PMI-GDP relationships, S&P Global projects annual growth to slow to 3.8% in 2Q 2026, down from 5% in the same period last year.

Sales fell at the sharpest rate since November 2022. Nearly 27% of firms reported weaker sales against 11% reporting an improvement, with businesses blaming client liquidity constraints, raw material shortages, slower supply chains, and rising prices. Even so, firms kept building inventories as a hedge against further disruption and anticipated price rises.

The primary pressures: Input-cost and output-price inflation cooled sharply from May’s near-record highs but stayed elevated, with firms citing continued upward pressure on fuel and materials from the conflict. Wage pressures persisted: staff costs rose at the second-quickest pace since January 2018, behind only May. Job losses eased, with cuts coming through natural attrition rather than active layoffs.

We’re in a transition, not a slump: “The June reading represents a transitional phase rather than an indicator of economic deterioration,” AASTMT economics professor Shaimaa Wagieh tells EnterpriseAM. “If inflation rates continue to fall and the central bank begins a gradual cycle of monetary loosening, the PMI is likely to witness a gradual improvement during the second half of the year, reflecting a greater return of productive and investment activity,” Wagieh says.

What’s next: Businesses expect lower regional tensions and state support to lift demand in the coming months. The August PMI read will show whether the ceasefire translates into a demand recovery — or whether the sector’s six-month contraction streak extends into a seventh.