Egypt’s non-oil private sector continued to experience economic strain in May, as a combination of entrenched inflation, weak consumer demand, and intensifying supply disruptions weighed heavily on commercial activity, according to the latest S&P Global Purchasing Managers’ Index survey. The headline PMI edged up slightly to 47.1 in May from 46.6 in April, yet it remained firmly under the neutral 50 threshold. This marks the fifth consecutive month of contracting business conditions across the sector. David Owen, Principal Economist at S&P Global Market Intelligence, noted that the data signals a likely slowdown in second-quarter GDP growth driven by the ripple effects of the broader Middle East conflict.
Domestic demand showed ongoing vulnerability, with incoming new orders shrinking for the fifth month in a row. The rate of this decline remained virtually unchanged from the recent lows seen in April, as high consumer prices continued to deter household spending and restrict new commercial client acquisitions. While overall business output also decreased sharply, the speed of the contraction decelerated marginally. The downturn was most acutely felt across the wholesale, retail, and service sectors, whereas manufacturing and construction industries staged a modest rebound following recent downturns.
On the operational cost front, businesses faced a severe escalation in inflationary pressures, with input expenses climbing at their fastest clip since early 2023. Corporate survey respondents highlighted spikes in fuel and electricity tariffs, currency devaluation, and rising labor costs, with wage inflation hitting its highest peak since 2018. To protect their profit margins, enterprises transferred a substantial portion of these overheads to consumers, fueling a rapid surge in retail prices that stands among the sharpest in the survey’s historical data. Concurrently, firms adjusted to the soft demand and rising financial pressures by reducing headcounts; employment levels dropped at the fastest rate since June 2020 through a mix of staff layoffs and structural hiring freezes for departing employees.
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