Business confidence hits four-year high in July, even though PMI stays in contraction

Egypt’s non-oil private sector saw its strongest business confidence since mid-2022 in July, even though on-the-ground business conditions are still tough, according to S&P Global’s latest Purchasing Managers’ Index (PMI) report (pdf). The headline seasonally adjusted PMI went up last month to 46.8 from June’s 41-month low of 46.0. While July marks our seventh straight month below the 50.0 break-even mark — meaning business is still contracting m-o-m — we are at least moving closer to that threshold.

SOUND SMART- While 50.0 separates monthly growth from contraction for individual companies, a reading of 32.0 is the real zero-growth line for the country’s wider economy on an annual basis. Every point Egypt scores above 32.0 means the overall economy is growing, and July’s 46.8 reading translates to an annual GDP growth rate of about 4% at the start of 3Q 2026. That means the country’s economy as a whole is expanding y-o-y, even if individual private businesses are still feeling a m-o-m pinch.

Demand is still dragging: New business orders fell for the seventh month in a row in July. Companies reported that quiet market conditions, high prices, shipping delays, and a dry spell for new projects kept customers from opening their wallets. Total factory output also dropped, though the speed of that decline eased to its slowest in four months.

The pressure is showing up in backlogs: Firms continued to trim their staff sizes in July, though only slightly, even as the amount of unfinished work piled up at the second-fastest rate in nearly three years. S&P noted that a mix of personnel shortages and raw-material scarcity created supply bottlenecks for several businesses, leaving them with more work than they had hands to finish.

Firms are buying less: Purchases of raw materials and inputs contracted at its sharpest rate since September 2023, with around a third of surveyed companies reducing input buying, partly because of weaker new orders. For the first time in five months, businesses also drew down their stockpiles, choosing to run leaner inventories because banknotes are tight and materials are hard to find. On the bright side, delivery times shortened slightly as the impact of the Middle East conflict on local supply lines eased.

Prices are the bright spot: Total input costs rose at their slowest pace in six months, sitting well below their long-term average, thanks to cheaper oil and a slightly weaker USD early in July. As a result, the prices companies charge their customers rose at their slowest rate in four months.

“The upshift in business confidence in July showed that firms saw some light at the end of the tunnel,” S&P Global Market Intelligence Principal Economist David Owen said. “Although the current demand slump continued to pressurize businesses to reduce their operating capacity, a much softer increase in input prices signalled that spending levels may start to turn.” However, Owen warned that this relief relied on a temporary dip in global oil prices early in July — a trend that has already started to reverse as regional tensions flared back up. “As such, we may see renewed upside risks to domestic cost pressures that could scupper predictions of a recovery in new business,” he concluded.

Optimism: The index tracking future output expectations climbed to its highest level since June 2022, signaling that businesses are growing more optimistic about the year ahead.