Egypt: PMI improves but still remains weak in April
May 3, 2016
The Emirates NDB Egypt Purchasing Managers’ Index (PMI) rose from March’s 44.5, which had marked the lowest reading since August 2013, to 46.9 in April. Despite the increase, the PMI index remains firmly below the 50-threshold that separates contraction from expansion in the non-oil producing private sector, where it has been for the last seven months.
April’s improvement reflects that output, new orders and employment recorded softer contractions than in March. Nevertheless, all three categories continued in decline. As for price developments, input prices increased sharply, reflecting the impact on prices of March’s notable devaluation of the Egyptian pound against the U.S. dollar. Producers passed on higher input costs to clients and output charges recorded a record rise. On top of this, higher input prices led to lower input buying as well as a decrease in pre-production inventories.
Jean-Paul Pigat, Senior Economist at Emirates NBD, commented that, “Egypt’s private sector continues to struggle amidst the FX shortage. Although further EGP weakness will eventually help lay the foundations for an economic recovery, in the short term uncertainty over the exchange rate could see additional declines in output, and a further rise in inflationary pressures.”