Egypt: Business conditions in the non-oil private sector deteriorate at a faster pace in February
March 5, 2019
The Emirates NBD Egypt Purchasing Managers’ Index (PMI) fell to 48.2 in February from 48.5 in January, representing the lowest reading since September 2017. The index therefore remained below the 50-threshold that separates contraction from expansion in the non-oil private sector for the fifth month running.
The PMI moderation came on the back of the fastest decrease in output since September 2017, with businesses citing cash flow problems and weather difficulties as reasons for falling output; Egypt has been affected by sandstorms in the first two months of the year. In a development that raises doubts about future output potential, new business orders fell at the fastest pace since June 2017, partly due to the quickest fall in export orders since October 2016, which was just prior to the removal of the pound’s peg to the USD in November 2016. Weak demand in February came despite sale price discounting by firms. Against this backdrop, headcounts were cut for the fifth consecutive month, helping reduce staff costs for the first time since April 2015.
Commenting on the outlook of firms, Daniel Richards, MENA economist at Emirates NBD, said: “Although conditions are difficult presently, over 44% of respondents expect output to be higher in 12 months’ time, sharing our expectation that economic conditions will become steadily more favorable over 2019. The interest rate cut enacted by the central bank on February 14 – the first since March last year – should help stimulate some private sector demand, which has lagged public investment in driving Egypt’s growth recovery over the past two years.”
Author: Edward Gardner, Economist