Egypt’s non-oil private sector slipped further into contraction in February as rising global commodity prices drove the sharpest increase in input costs in nine months, according to data released on Tuesday by S&P Global.
The headline Purchasing Managers’ Index (PMI) fell to 48.9 in February from 49.8 in January, remaining below the 50.0 threshold that separates growth from contraction. While the reading was still above the long-run average of 48.3 — and broadly consistent with annual non-oil GDP growth of around 4.5% — it reflected the first decline in business activity in four months.
S&P said all five sub-components of the index signalled weaker operating conditions compared with January, as firms grappled with softening demand and intensifying price pressures.
Imported inflation squeezes margins
Survey respondents reported a fresh decline in new orders, with sales falling across manufacturing, wholesale and retail, and services. Construction was the only sector to register improved demand.
At the same time, companies faced mounting cost burdens. Average input prices rose at the fastest pace since May 2025, driven largely by higher global prices for oil and metals. Firms highlighted rising import expenses, underscoring Egypt’s exposure to imported inflation despite easing domestic price pressures.
“Egyptian non-oil companies were notably exposed to the uplift in global commodity prices, with firms emphasising 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,” said David Owen, Senior Economist at S&P Global Market Intelligence.
Selling prices rose only marginally in February, reflecting weak demand conditions and competitive pressures. Staff numbers declined for a third consecutive month, though the pace of job cuts remained modest, with some firms citing hiring freezes while others pursued limited recruitment as part of operational adjustments.
War-driven volatility heightens risks
The resurgence in commodity costs comes amid rapidly escalating tensions between the US and Iran. Over the past week, the conflict deepened after direct US strikes on Iranian-linked targets prompted retaliatory threats, fuelling fears of supply disruptions across energy markets and sending oil prices sharply higher.
Although Egypt is geographically removed from the Persian Gulf, the latest market turbulence highlights its vulnerability to external shocks and broader Middle East instability.
The Egyptian pound slipped past the 50-per-dollar mark on Tuesday, falling by as much as 1.9% before trimming losses to trade at 50.005 per dollar by 12:38 p.m. in Cairo — its weakest level since June, according to Bloomberg data.
The decline comes after an emerging-markets currency index recorded its worst session since November 2024 on Monday as investors fled from risk assets.
Global tensions threaten disinflation trend
The renewed pressure from imported costs contrasts with a marked easing in domestic inflation.
Headline consumer price growth slowed to 10.1% in January 2026, down from 23.2% a year earlier, extending a disinflation trend that has provided the Central Bank of Egypt with scope to lower interest rates in February.
The rate cuts have aimed to support growth and private-sector recovery after an extended tightening cycle. However, the recent depreciation of the pound raises the risk that imported inflation could resurface if currency weakness persists.
Owen cautioned that firms would be keen to see commodity markets stabilise, noting that previous episodes of elevated input cost inflation had constrained output.
While the February PMI suggests the non-oil economy remains broadly resilient, the combination of external price shocks, currency volatility and geopolitical uncertainty presents a fresh test for policymakers seeking to anchor inflation expectations and sustain growth momentum.
