CAIRO, Nov 5 (Reuters) - Activity in Egypt's non-oil private sector contracted slightly in October for the third straight month, a survey showed on Tuesday.

The IHS Markit Egypt Purchasing Managers' Index (PMI) for the non-oil private sector declined to 49.2 in October from 49.5 in September, a notch below 2019's monthly average of 49.3 and still below the 50.0 mark that separates growth from contraction.

Egypt's non-oil private sector has expanded in only six of the past 36 months, and in only two months of the past year.

Lower sales and problems with liquidity led to the overall reduction, the PMI said, which "contributed to a further increase in work-in-hand, albeit one that was the slowest since July."

Demand was weak, companies surveyed said, with new orders falling at the fastest rate since May although still modestly. Foreign sales also fell for the first time in four months.

The output sub-index fell to 48.6 in October from 49.3 in September. Though the employment sub-index fell slightly to 50.7 from 51.0, it marked the third consecutive month of growth.

"Labour market conditions have reportedly been slow, although continued hiring activity among surveyed firms suggests a possible improvement in the future," said David Owen, an economist at survey compiler IHS Markit.

"Moreover, after falling to a near three-year low in September, the forward-looking business outlook improved greatly during October, signalling regained hopes of stronger market activity in the months ahead."

Nearly half of survey respondents expected output to rise over the next year, "relating this to hopes of new contracts and greater tourism activity." However, 5% of businesses expected a further fall in output due to weak economic conditions.

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(Reporting by Yousef Saba; Editing by Hugh Lawson)

((Yousef.Saba@thomsonreuters.com; +201222184730))

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