Egypt: PMI largely unchanged in June, signals a continuing deterioration in business conditions
July 4, 2017
The Emirates NBD Egypt Purchasing Managers’ Index (PMI) inched down from 47.3 in May to 47.2 in June. The index hence remains stubbornly below the 50-point threshold that separates contraction from expansion in the non-oil producing private sector. This is a sign that, although the economy looks to be slowly on the mend, Egyptian firms are still struggling and are being squeezed by weak domestic demand and soaring input costs.
June’s relatively flat reading was underpinned by a continuing decline in output and new orders, although the latter decreased at the joint slowest pace in ten months. Encouragingly, export orders grew for the third month in succession, as firms reap the rewards of a markedly weaker pound. However, the flipside of the currency depreciation was a continued strong increase in input costs, which were once more passed on to clients in the form of higher output prices. Nevertheless, the rate of inflation was the second weakest in sixteen months. In response to lower economic activity, firms continued to shed jobs, albeit at a fairly modest rate. Despite currently challenging conditions, firms remain optimistic regarding business prospects for the coming year, which bodes well for the PMI in the months ahead.
According to Khatija Haque, Head of MENA Research at Emirates NBD, “While the Egyptian economy remains under pressure, there are further signs of stabilization as export orders rose for the third straight month in June and selling price inflation eased slightly. However, firms continued to cite weak domestic demand conditions as weighing on activity and new order growth.”
Author: Oliver Reynolds, Economist