Arab Finance: Egypt's non-oil private sector remained under pressure in May 2026 as rising inflation, higher fuel and electricity costs, and currency weakness weighed on demand, according to the latest S&P Global Egypt Purchasing Managers' Index (PMI) survey.
The headline seasonally adjusted PMI stood at 47.1 in May, up from 46.6 in April, remaining below the 50.0 threshold that separates growth from contraction for the fifth consecutive month.
The reading indicates that non-oil business activity continued to decline during the month and points to slower economic growth in the second quarter (Q2) compared with the end of 2025.
Higher inflation remained a key challenge for businesses, as input costs increased at their fastest pace since January 2023, driven by higher diesel and electricity prices, currency depreciation, and rising wages.
Meanwhile, wage pressures reached their highest level since January 2018, while nearly half of the surveyed firms reported an increase in input costs.
As operating expenses rose, companies passed part of those costs on to customers through higher selling prices. Firms reported one of the strongest increases in output charges on record as they sought to protect margins.
The pressure on prices continued to affect customer demand. New orders declined for the fifth month in a row and remained close to April's 37-month low, while output also fell.
Wholesale and retail businesses and service providers recorded the largest declines in activity, although manufacturing and construction showed modest improvement following earlier contractions.
Companies also faced increasing disruptions across supply chains. Supplier delivery times lengthened at the fastest pace in nearly four years, with businesses citing shipping route disruptions linked to regional tensions and supplier reluctance to commit to prices amid market volatility.
Against this backdrop, firms reduced staffing levels at the fastest rate since June 2020. Survey respondents indicated that workforce reductions resulted from both active redundancies and decisions not to replace employees who left voluntarily.
Combined with supply constraints, lower staffing levels contributed to capacity pressures and an increase in outstanding work, with backlogs rising at the fastest pace since September 2023.
Despite weaker sales, businesses were cautious about reducing inventories. Purchasing activity fell only slightly, while stocks of inputs increased at the fastest rate in nearly three years as firms sought to build inventories ahead of expected future price increases.
Looking ahead, business sentiment improved to its highest level since August 2024. Companies expressed optimism that economic conditions and exchange rates could improve over the next 12 months, although inflation remained a major concern for many respondents.
