Egypt’s non-oil private sector moved closer to stabilization in August, with the S&P Global Egypt Purchasing Managers’ Index (PMI) rising to 49.6, its highest level in seven months, as hiring rebounded and business confidence strengthened despite continued weakness in demand and renewed cost pressures.
The seasonally adjusted index rose 2.8 points from 46.8 in July, according to S&P Global’s September 3 PMI release. August’s reading was also 3.6 points above June’s 41-month low of 46.0 and just 0.2 points below January’s 49.8.
The PMI remained below the 50.0 mark that separates expansion from contraction, indicating that operating conditions continued to deteriorate, albeit at a much slower pace. S&P Global noted that a PMI reading of 33.4 is historically consistent with no change in annual real GDP growth in Egypt, meaning the latest reading remains consistent with positive annual economic growth.
Recovery gains pace
The August rebound marks a significant improvement from the weakness recorded earlier this year. The PMI began 2026 at 49.8 before falling to 46.0 in June, its lowest level in 41 months. It then rose to 46.8 in July and 49.6 in August.
The improvement was driven by slower declines in output and new orders. New business fell for an eighth consecutive month, but at its weakest rate since February, while the decline in output also eased, particularly across the services sector.
The latest figures therefore point to a sharp easing in the pace of contraction rather than a return to outright expansion.
Hiring rebounds
Employment recorded one of the strongest turnarounds in the August survey.
S&P Global said employment increased for the first time since October 2025, with the rate of job creation reaching the second-fastest pace in the survey’s more than 15-year history.
The increase came partly in response to capacity pressures that had built up in previous months and helped stabilize backlogs of work following three consecutive months of accumulation.
The turnaround contrasts with January, when employment fell at its fastest pace since October 2023 as companies anticipated spare capacity and worked through outstanding orders.
Confidence hits four-year high
Business sentiment also strengthened sharply. S&P Global reported that business confidence reached its highest level in more than four years, with more than 21% of surveyed firms expecting growth over the coming 12 months.
Companies cited anticipated new projects, tourism expansion and branch openings as reasons for their optimism.
The improvement follows July’s increase in the Future Output Index to its highest level since June 2022. At the start of the year, companies were only marginally optimistic about the outlook.
Cost pressures return
The improving outlook has yet to translate into sustained relief on business costs.
Input costs and output charges both rose at faster rates in August, marking the first acceleration in price pressures since May, according to S&P Global. Around 23% of firms reported higher purchasing costs, citing materials, oil and transportation, while wage pressures remained elevated.
The renewed pressure follows several months of easing inflation. In July, S&P Global reported that input-cost inflation had slowed to its weakest pace in six months, while output-price inflation reached a four-month low. In January, companies reduced their selling prices for the first time since July 2020.
The latest increase in business costs comes as consumer inflation remains elevated. Annual urban headline inflation rose to 14.9% in July from 14.3% in June, while core inflation increased to 14.7% from 14.3%, according to the Central Bank of Egypt’s August 10 CPI release.
The CBE said on August 20 that inflation was expected to rise further during the third quarter before beginning to decline from the first quarter of 2027.
Purchasing remains weak
Purchasing activity remains one of the clearest weaknesses in the private sector.
Input purchases declined for a fifth consecutive month in August and at their fastest pace in nearly three years. Around 29% of firms reduced purchases, more than twice the proportion reporting increases.
Companies cited material shortages, cash-flow constraints and delayed supplier payments. S&P Global also reported that disruption around the Strait of Hormuz compounded supply difficulties.
The divergence between improving confidence and weak purchasing activity suggests that companies are becoming more willing to expand but remain constrained by access to materials and working capital.
Rates keep pressure on
The recovery is taking place against a relatively tight monetary policy backdrop.
At its August 20 meeting, the CBE kept the overnight deposit rate at 19%, the overnight lending rate at 20% and the main operation rate at 19.5%.
The central bank said the restrictive stance remained necessary to anchor inflation expectations and support disinflation. High borrowing costs also add to financing pressures facing companies, particularly as PMI respondents continue to report cash-flow constraints and delayed supplier payments.
Regional risks persist
Geopolitical tensions remain a key risk to the recovery, particularly through their impact on energy prices and supply chains.
S&P Global reported that the PMI fell to 46.6 in March as regional conflict disrupted fuel and other supplies and pushed up input costs. By July, lower oil prices had helped ease inflationary pressures, but S&P Global warned that renewed tensions could quickly reverse that improvement.
August’s survey provided early evidence of that risk, with companies again reporting higher oil, material and transportation costs as well as shipping disruptions.
The CBE also identified geopolitical developments and supply-chain disruptions as significant risks in its August monetary policy statement.
GDP Growth Continues
The private-sector recovery is unfolding against an economy that continues to expand.
Real GDP grew 5% year-on-year in the first quarter of 2026, compared with 5.3% in the fourth quarter of 2025, according to the CBE’s August 20 monetary policy statement.
The central bank said its estimates pointed to a moderation in second-quarter growth, partly due to regional tensions, while it expects growth to average around 5.0% in fiscal year 2025/26.
S&P Global’s latest data similarly point to a more favorable third-quarter outlook, with the August PMI reading historically consistent with annual GDP growth of around 5%.
The PMI and GDP figures are not directly comparable. The PMI measures monthly operating conditions among companies in the non-oil private sector, while GDP captures economic activity across the broader economy.
External position strengthens
Egypt has also entered the recovery period with stronger external buffers.
Net international reserves reached $56.29 billion at the end of July, up from $52.59 billion at the end of January, according to CBE data released on August 5. The increase of around $3.7 billion represents a rise of roughly 7% during the first seven months of the year.
The IMF has also pointed to improving macroeconomic conditions. Following its July 30 Executive Board meeting, the Fund said Egypt had entered its latest program review with stronger growth, declining inflation and higher international reserves.
The IMF completed Egypt’s seventh review under the Extended Fund Facility and second review under the Resilience and Sustainability Facility, providing access to around $1.8 billion and bringing total purchases and disbursements under the programs to approximately $7.3 billion.
The Fund nevertheless stressed the importance of exchange-rate flexibility, fiscal discipline and structural reforms to sustain macroeconomic stability and support private-sector-led growth.
A turning point?
August’s PMI suggests that Egypt’s non-oil private sector is moving closer to stabilization after a difficult first half of the year.
The improvement is increasingly visible in several key indicators. Hiring has rebounded, business confidence is at a more than four-year high, and declines in new orders and output have moderated.
But the sector has yet to return to monthly expansion. Purchasing activity remains weak, while renewed cost pressures could weigh on demand and margins.
The key test in the coming months will be whether stronger business expectations translate into sustained increases in orders, output and investment.
For now, the August PMI points to a private-sector economy emerging from its mid-year slump, but not yet firmly back in expansion.
S&P Global Principal Economist David Owen said the latest figures showed “increased signs of economic recovery” across Egypt’s non-oil sector. While the PMI could still point to weaker second-quarter GDP growth, he said the outlook for the third quarter was more encouraging.
