After a promising finish to 2025, Egypt’s non-oil private sector lost momentum in January as weak demand weighed on activity and employment fell at its fastest pace in more than two years, according to the latest Purchasing Managers’ Index (PMI) survey by S&P Global.
The headline PMI slipped to 49.8 in January from 50.2 in December, signalling a marginal deterioration in business conditions. While the index remained close to the neutral 50.0 threshold, S&P noted that the reading remained higher than the long-run average, indicative of a “strong pace of non-oil GDP growth,” the report read.
The slowdown came despite a further improvement in output, which expanded for the third consecutive month. Although the pace of growth was slight, it marked the longest stretch of expansion since late 2020, supported in part by a pickup in foreign demand.
Orders weaken as backlogs shrink
Overall new orders, however, fell after two months of expansion, with several firms reporting weaker sales compared with December. As output continued to rise while new work declined, many companies were able to clear outstanding orders, leading to a sharp reduction in backlogs.
Outstanding business fell at the fastest rate in nearly three years, a development that raised concerns about the sustainability of output growth.
David Owen, Senior Economist at S&P Global Market Intelligence, said, “A note of caution was sounded by a decline in backlogs of work in January, which indicates that firms may have less room to expand in the coming months if sales volumes remain broadly stable.”
Cost pressures ease
The latest survey also pointed to easing inflationary pressures across the non-oil sector. Firms reduced their selling prices in January for the first time since July 2020, reflecting softer cost increases and competitive pressures.
Operating expenses rose at a slower pace, with both purchasing prices and staff costs increasing less sharply than in December. While some respondents cited higher prices for inputs such as metals and fuel, the overall rate of input cost inflation remained well below the long-term average.
In the wider economy, headline inflation remained broadly stable through the final three months of 2025, following a steady decline since May. Consumer price inflation stood at 12.3% in December.
Employment falls, purchasing turns cautious
The drawdown in backlogs fed through to employment, which recorded its steepest decline since October 2023. Several companies opted not to replace departing staff, leaving positions vacant during the month.
Owen said the fall in employment suggested that businesses were anticipating spare capacity in the months ahead.
Purchasing activity also weakened. After expanding for the first time in ten months in December, input buying fell modestly in January as firms adopted a more cautious approach. However, improved delivery times and softer demand allowed inventories to rise for the first time since September.
With sales, purchasing and employment all under pressure, non-oil firms maintained a cautious outlook for the year ahead. While expectations for future activity remained positive overall, sentiment was only marginally upbeat.
Among the eight economies tracked by S&P Global, Egypt was the weakest performer in 2025, recording eight consecutive months of subdued activity amid persistent demand weakness and broader macroeconomic headwinds.
