Egypt’s non-oil private sector showed resilience in February, absorbing a renewed surge in global commodity prices even as overall business activity softened slightly after a strong start to the year.
According to the latest S&P Global Egypt Purchasing Managers’ Index (PMI), the headline reading fell to 48.9 in February from 49.8 in January, remaining just below the 50-point mark that separates expansion from contraction. While the figure points to a modest cooling in operating conditions, economists say it still aligns with solid economic growth at the national level.
Strong start to the year fades
The February reading follows a period of improving activity that had boosted business sentiment earlier in the year. In January, Egyptian firms recorded their third consecutive month of rising output—the longest stretch of growth since late 2020—supported by stronger foreign demand and companies clearing accumulated order backlogs.
That momentum eased in February, with output declining for the first time in four months and new orders contracting at their fastest pace in five months, reflecting softer domestic demand.
Rising input costs challenge firms
February also saw a shift in inflation pressures, with input costs accelerating after easing in January. The rise was driven largely by higher global prices for oil and metals, pushing operating expenses up at the fastest rate since May 2025.
Consumer inflation, however, continued to ease. Urban inflation slowed to 11.9% year-on-year in January, down from 12.3% in December, according to the Central Agency for Public Mobilization and Statistics. Despite rising costs, many companies chose not to pass the increases fully onto customers, raising selling prices only marginally to protect demand and maintain competitiveness, even at the expense of slimmer margins.
Employment trends reflect caution
Staffing levels also reflected a cautious approach. February marked the third consecutive month of workforce reductions, as companies implemented hiring freezes and selective job cuts in response to weaker new orders. January’s adjustments had largely been tied to clearing backlogs and anticipating spare capacity, while February’s reductions were more directly linked to softer demand.
Outlook remains positive
Despite the month-to-month fluctuations, the broader economic outlook remains constructive. S&P Global’s historical modeling indicates that a PMI reading of 32 corresponds to zero annual GDP growth, meaning February’s 48.9 still signals ongoing economic expansion.
David Owen, Senior Economist at S&P Global Market Intelligence, noted that Egyptian non-oil firms were particularly exposed to the recent rise in global commodity prices.
“Firms emphasised the impact of higher prices for oil and metals, resulting in the sharpest increase in business costs for nine months and hitting margins at a time when firms are reluctant to raise their selling prices,” Owen said. “Companies will be keen to see commodity markets settle, especially as periods of high input cost inflation have typically constrained business output.”
For now, the data suggests Egypt’s private sector is holding its ground, navigating global price pressures while the broader economy maintains a steady growth trajectory.
