Egypt: PMI rises to nine-month high in April, signals softer deterioration
May 3, 2017
The Emirates NBD Egypt Purchasing Managers’ Index (PMI) ticked up from 45.9 in March to 47.4 in April, the highest reading in nine months. The result indicates a softer worsening of business conditions, with the indicator remaining below the 50-point threshold that separates contraction from expansion in the non-oil producing private sector. Apart from a blip last month, the PMI has risen uninterruptedly since November’s nadir, a month in which the government undertook radical reforms in a bid to turn around the ailing economy.
April’s milder contraction was driven by a decline in output and new orders, although in both instances the fall was less pronounced than in March. In response to slack economic activity, firms laid off staff and reduced purchasing activity, although the rate of job shedding was the lowest in over one and a half years. Positive news came from external markets, with Egyptian firms reporting increased export orders for the first time in 21 months, likely aided by the weakness of the pound. Input prices rose again as a result of last year’s currency devaluation, although price pressures ebbed somewhat compared to March, with companies upping their selling prices as a result.
The latest PMI data points to an economy beginning to find its feet. As Tim Fox, Head of Research at Emirates NBD, comments: “the slower pace of deterioration in the headline Egypt PMI is an encouraging start to Q2 as it follows on from a gradually improving trend already seen through Q1. It reinforces the perception that after bottoming in Q4 2016 the economic situation in Egypt is beginning to stabilize”.
Author: Oliver Reynolds, Economist