RIYADH: Egypt’s non-oil private sector contracted at its sharpest pace in nearly three-and-a-half years in June as demand weakness intensified and supply disruptions persisted, data showed.
The headline S&P Global Egypt Purchasing Managers’ Index fell to 46 in June from 47.1 in May, marking a sixth straight month below the neutral 50 threshold and the lowest reading since January 2023.
Egypt’s weak reading contrasted with Saudi Arabia, where the non-oil PMI climbed to 53.3 in June, while Kuwait and Qatar remained in contraction at 46.4 and 47.6, respectively, underscoring uneven business conditions across the Gulf and wider Middle East amid regional tensions.
The reading extended the contraction in Egypt’s non-oil private sector to a sixth consecutive month, underscoring the impact of the Middle East conflict on trade, supply chains, and overall demand.
David Owen, principal economist at S&P Global Market Intelligence, said: “The PMI declined to 46 in June, lending greater confidence to forecasts of a softening of GDP growth in Q2.”
He added: “The Middle East conflict has exacted a toll on the domestic non-oil sector, with the latest data signalling the steepest decline in new work in over three-and-a-half years.”
New orders fell at the fastest pace since November 2022, with nearly 27 percent of firms reporting weaker sales compared with just 11 percent reporting improved sales, while S&P Global’s PMI-GDP model suggested annual growth would cool to about 3.8 percent by the end of the second quarter, down from 5 percent a year earlier.
Businesses pointed to a combination of liquidity constraints among clients, raw material shortages, slower supply chains and elevated prices as the main drags on demand, with the fallout from the Middle East conflict cited repeatedly as a common thread. External trade also weakened, as the conflict disrupted regional commerce.
Output fell for a fifth consecutive month, with the rate of decline the steepest since early 2023, while employment continued its downward trend, though firms said the cuts came mainly through natural attrition rather than active layoffs, with the pace of job losses easing slightly from May.
Purchasing activity slowed, even as firms continued to build inventories as a buffer against expected price rises and further supply-chain disruption. Supplier delivery times lengthened again, albeit at a softer pace than in May, with raw material shortages, disruption to shipping in the Strait of Hormuz, and rising fuel costs cited as factors.
Inflationary pressures, meanwhile, eased considerably from May’s near-record highs, with both output price and input cost inflation cooling. Wage growth, however, stayed elevated, posting its second-fastest increase since January 2018.
“The moderation in inflationary pressures recorded in the June survey data therefore offers some relief to firms,” Owen said, adding that “further easing appears possible should global energy prices decline and regional tensions cool, which would add support to the improved outlook for output seen over the past couple of months.”
Despite the deteriorating current conditions, businesses’ expectations for future output remained higher than earlier in the year, with some citing hopes of reduced conflict-related disruption and increased government support, although overall sentiment softened slightly compared with May.
