Egypt’s Non-Oil Businesses Shrink Again in August

Post by : Monika

Photo: Reuters

Egypt’s non-oil private sector faced another difficult month in August 2025. For the sixth month in a row, businesses outside the oil industry shrank as customers reduced spending and prices stayed high. This information came from the Purchasing Managers’ Index (PMI), which measures the health of businesses.

The August PMI for Egypt stood at 49.2, a slight fall from 49.5 in July. Since any number below 50 means contraction, Egypt’s private sector continued to weaken. Although the decline was not very steep, the fact that businesses have been shrinking for half a year in a row shows how tough the economic environment has become.

Understanding the PMI

The Purchasing Managers’ Index (PMI) is one of the most widely used tools to measure economic activity. It looks at things like new orders, output, hiring, and stock levels. If the number is above 50, it means growth; below 50 shows decline.

• Above 50: Businesses are expanding.
• Below 50: Businesses are shrinking.

Egypt’s score of 49.2 in August shows that non-oil private businesses were still struggling. While the number only dropped slightly compared to July, it still signals ongoing weakness.

What Happened in Businesses

Egypt’s private companies faced several challenges in August:

Weak Customer Demand
Shoppers and clients bought less because inflation kept prices high. This meant fewer new orders for businesses.

Falling Output
Since demand was low, production also went down. Factories and service providers slowed down their activities.

High Prices
Costs remained high even though they rose at a slower pace. This made it harder for companies to offer affordable prices.

Overall, every part of Egypt’s non-oil sector—from manufacturing to services—was affected. The slowdown was not as severe as it could have been, but the fact that it continued for so many months is a concern.

Positive Signs Amid Challenges

Even with all the struggles, August did bring two small rays of hope for Egyptian companies.

1. More Hiring

For the second straight month, private businesses added new workers. This was significant because it ended a long nine-month period when no jobs were created. Companies said they wanted to improve their ability to handle tasks and reduce backlogs of unfinished work.

This hiring trend shows that, while businesses are cautious, they are also preparing for possible better times ahead. Adding workers means some companies expect demand to rise again in the future.

2. Slower Growth in Input Costs

Another piece of good news was that input costs—such as raw materials, transport, and energy—rose at their slowest pace in more than four years.

Even though selling prices were still high, the slower rise in input costs gave companies a chance to manage their profit margins better. In fact, selling prices went up faster than input costs, which slightly improved the gap between what companies pay and what they earn.

Economist’s View

Economist David Owen explained that inflation—the steady rise in prices—remains one of the biggest problems for Egyptian businesses. High prices discourage customers from buying, and they also raise production costs for companies.

However, Owen noted that the slower pace of cost increases in August could help in the long run. If businesses pass on these lower costs to customers by cutting their prices, demand might improve. That, in turn, could boost production and help businesses grow again.

How Companies Feel About the Future

Despite the small positive signs, many businesses in Egypt remain very cautious.

Stock Levels Cut: Firms bought fewer raw materials and supplies, and they also reduced the amount of stock they keep. This shows that companies do not expect a quick rise in demand.

Low Confidence: Business confidence about the year ahead stayed weak. It was only slightly better than in June 2025, which had been the worst month for business optimism.

This lack of confidence is important. If companies do not believe demand will rise, they are less likely to invest, expand, or hire in big numbers. That can slow recovery even more.

Why This Matters

The condition of Egypt’s non-oil private sector is important because it affects the country’s wider economy. Here’s why:

Slow Business Activity Hurts Growth
When businesses shrink, the economy struggles. It means less production, fewer services, and reduced job creation.

Jobs Are Key
Even small increases in hiring are valuable. More workers mean more income for families, which can help boost spending and demand.

Lower Costs Bring Relief
If the trend of slower cost increases continues, businesses will find it easier to set competitive prices. This can make them stronger in both local and export markets.

Caution Slows Recovery
Without confidence, companies will hold back from investing. That keeps economic recovery slow and fragile.

The Bigger Picture

Egypt’s economy has faced many difficulties in recent years. Inflation has been high, partly due to global issues like rising food and fuel costs. Local factors such as currency weakness and debt pressures have also made things harder.

The government has been trying to stabilize the situation, but recovery has been slow. The non-oil private sector is an important part of the economy because it includes manufacturing, construction, trade, and services—areas that affect everyday life for most Egyptians.

• If this sector continues to shrink, it will be difficult for the overall economy to grow in a strong and sustainable way.
• What Could Improve the Situation?
• For Egypt’s private businesses to recover, several things need to happen:

Lower Inflation
Prices need to stabilize so that customers feel confident enough to spend again.

Cheaper Input Costs
If raw materials and transport costs keep rising slowly, businesses can manage their expenses better.

Improved Confidence
Businesses need to feel more secure about the future. That will encourage them to invest, expand, and hire more people.

Government Support
Policies that support small and medium-sized companies could help speed up recovery. These businesses often provide the most jobs.

Looking Ahead

For now, Egypt’s non-oil private sector is still facing many challenges. The PMI shows that contraction is continuing, though not at a dramatic pace.

The two positive signs—job creation and slower cost increases—are encouraging, but they are not enough yet to turn the tide. Until demand improves and inflation comes under better control, most businesses will remain cautious.

The next few months will be crucial. If cost pressures continue to ease and companies pass these savings to customers, spending could rise again. That would help the private sector regain its strength and support the wider Egyptian economy.
August 2025 was another tough month for Egypt’s private businesses outside the oil industry. The PMI showed contraction for the sixth month in a row, driven by weak demand and high prices.

However, there were some hopeful signs. Hiring increased for the second month, and input costs rose at their slowest pace in years. Economists say these improvements could lead to better demand if companies lower their prices.

Still, confidence remains low. Businesses are careful, cutting back on purchases and stock. For now, recovery remains uncertain, but small steps forward suggest that improvement is possible if inflation continues to ease.

Egypt economy