Egypt's non-oil business conditions deteriorate further in June, PMI shows

Egypt's non-oil private sector saw a fourth consecutive month of contraction in June, with the S&P Global PMI falling to 48.8 from 49.5, driven by accelerating declines in output, new orders, and the sharpest reduction in purchasing activity in 11 months. This sustained weakness led to record-low future activity expectations amid subdued demand and geopolitical concerns, compounded by a fifth consecutive month of employment decline. However, a positive development was the softening of input cost pressures, which helped slow the rise in output prices.

Analysis

Egypt's non-oil private sector demonstrated a deepening contraction in June, as the S&P Global Purchasing Managers’ Index (PMI) declined to 48.8 from 49.5 in May, marking the fourth consecutive month below the 50.0 growth threshold. The deterioration was primarily driven by an accelerated decline in both new orders and output volumes, compounded by the most significant reduction in purchasing activity seen in 11 months. This sustained weakness has severely impacted business sentiment, with future output expectations plunging to a record low for June, reflecting concerns over subdued order books and escalating geopolitical risks. The labor market also continued to weaken, with employment decreasing for the fifth month in a row, albeit at a fractional rate. A marginal positive was observed in the easing of input cost inflation, which translated into a slower rise in output prices, offering a sliver of relief to businesses but failing to offset the negative demand and activity trends.

Key Decisions for Investors

• Given the fourth consecutive month of contraction and record-low business confidence, investors should exercise caution with direct exposure to Egypt's domestic non-oil economy.
• The combination of weakening demand, geopolitical risk, and declining employment points to sustained headwinds, warranting a defensive posture in portfolios with Egyptian assets.
• Monitor incoming inflation data closely, as the noted softening in input costs is the primary potential catalyst for relief, although it is currently insufficient to offset the broader negative activity trends.