Egypt: PMI declines in August
September 5, 2016
The Emirates NDB Egypt Purchasing Managers’ Index (PMI) decreased notably from July’s 48.9 to 47.0 in August, the lowest reading in four months. The PMI index has been below the 50-threshold that separates contraction from expansion in the non-oil producing private sector since October 2015.
August’s setback reflected severe contractions in output, new orders and employment when compared to the previous month. The deterioration was mainly driven by weak demand dynamics, plagued by high prices and an acute dollar shortage. A weak Egyptian pound also raised prices for raw materials, fueling the firms’ reluctance to engage in purchasing activities. With cost pressures on the rise, input buying and pre-production inventories decreased at faster rates compared to July.
Jean-Paul Pigat, Senior Economist at Emirates NBD, commented on the economy, “The August PMI figures underscore the urgency to initiate a wide-ranging economic reform program. Most importantly, the survey data highlights the ongoing need to move to a more flexible exchange rate system in order to achieve a market-clearing rate for the EGP.”
Author: David Ampudia, Economist