Egypt’s non-oil private sector continued to demonstrate resilience in September, as businesses maintained recruitment and remained optimistic about future activity despite renewed pressure on demand and operating costs.
The S&P Global Egypt Purchasing Managers’ Index (PMI) fell to 47.2 from 49.6 in August, reflecting a renewed deterioration in business conditions after a summer recovery.
According to S&P Global’s October 5 release, the seasonally adjusted index fell below its long-run average of 48.2 and the 50.0 threshold separating monthly expansion from contraction. However, the reading remained above the 33.4 level historically associated with no change in annual real GDP growth, corresponding to estimated annual growth of approximately 4.3% under S&P Global’s PMI-GDP model.
The decline reversed part of the improvement recorded over the summer. The PMI started 2026 at 49.8 before falling to a 41-month low of 46.0 in June, then recovering to 46.8 in July and 49.6 in August. September’s results suggest that while the recovery has lost momentum, businesses continue to strengthen their capacity in anticipation of better conditions.
Hiring and business confidence hold up
Employment increased for a second consecutive month, marking the first back-to-back expansion in payrolls in more than a year. Although the pace of recruitment slowed from August, companies continued hiring to expand staffing capacity and manage growing workloads.
Outstanding business increased for a fifth consecutive month, according to S&P Global, suggesting that companies continue to face accumulated orders even as new demand weakens.
Business expectations also remained positive. In August, more than 21% of surveyed firms anticipated higher output over the following 12 months, citing prospective projects, tourism expansion and branch openings. Although confidence moderated from its more than four-year high, September’s survey showed that businesses remained optimistic about future activity.
These trends offer a foundation for further growth, provided that expectations translate into stronger orders and production.
Demand and costs remain key challenges
New orders and output declined at sharper rates in September, as companies reported weaker customer demand amid challenging market conditions, geopolitical disruptions and inflationary pressures.
Purchasing activity contracted for a sixth consecutive month, although the decline was the least pronounced since May. Inventories fell for a third consecutive month as businesses continued to manage procurement cautiously.
Cost pressures also remained elevated. Businesses increased selling prices sharply as higher expenses for oil, metals, electricity and transportation fed through to customers. Although the pace of selling-price inflation eased slightly from August, it remained steep relative to the survey’s historical trend.
Wage inflation provided some relief, slowing to an eight-month low.
The broader inflation picture showed signs of improvement in annual terms. According to the Central Bank of Egypt’s October 11 inflation release, annual urban headline inflation eased to 13.9% in September from 14.5% in August, while annual core inflation declined to 14.1% from 14.9%.
However, monthly headline inflation accelerated to 1.3% from 0.1% in August, while monthly core inflation rose to 0.8% from 0.3%. The figures suggest that, although annual inflation continued to ease, near-term price pressures persisted.
At its September 24 monetary policy meeting, the CBE maintained the overnight deposit rate at 19%, the overnight lending rate at 20%, and the main operation and discount rates at 19.5%. The central bank projected that annual headline inflation would gradually decline toward its 7% target, with a tolerance margin of ±2 percentage points, during the second half of 2027.
Easing inflation would provide a more supportive environment for businesses to manage expenses, plan investment and respond to stronger demand, although the pace of improvement will depend partly on energy prices and regional developments.
Economic growth and external buffers support the outlook
The private-sector slowdown comes against a broader economy that continues to expand. According to the CBE’s September 24 monetary policy statement, real GDP growth reached 4.7% year-on-year in the second quarter of 2026, compared with 5.0% in the first quarter. Growth averaged 5.1% in fiscal year 2025/26, and the central bank expects it to remain broadly stable around that level in fiscal year 2026/27.
Egypt’s external buffers have also strengthened. According to the CBE’s October 7 reserves release, net international reserves reached $57.35 billion at the end of September, up from $57.21 billion in August and $52.59 billion at the end of January. The increase of approximately $4.75 billion represents growth of around 9% during the first nine months of 2026. The September figure was provisional.
International support has continued as well. On July 30, the International Monetary Fund completed Egypt’s seventh review under the Extended Fund Facility and second review under the Resilience and Sustainability Facility, providing access to approximately $1.8 billion and bringing total purchases and disbursements under the programs to around $7.3 billion. The IMF highlighted the economy’s resilience while emphasizing the importance of continued reforms and private-sector-led growth.
These developments provide a more supportive macroeconomic backdrop. The next priority is to translate economic stability and stronger external buffers into increased investment, production and demand across the private sector.
Building on private-sector resilience
September’s PMI presents a mixed but cautiously encouraging picture. While new orders and output weakened, companies continued hiring, outstanding workloads increased and business expectations remained positive.
S&P Global Principal Economist David Owen said the latest survey continued to point to “resilience among Egyptian businesses,” highlighting employment growth, rising backlogs and optimism about the year-ahead outlook.
For Egypt, the opportunity lies in building on this resilience by strengthening demand, easing cost pressures and supporting private investment. Although the private sector has yet to return to monthly expansion, continued hiring and improving macroeconomic indicators offer a foundation for further progress.
The coming months will show whether stronger business expectations translate into sustained increases in orders, output and employment, turning the recent recovery into a more durable expansion.
