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Currency weakness continued to place further pressure
on input costs

Egypt non-oil business down, but exports rise

CAIRO, June 5, 2017

Business conditions in Egypt’s non-oil private sector deteriorated in May, as has been the case throughout the past 20 months, registered a survey-record rise in new export orders, as international demand strengthened, a report said.

However, the respective rates of contraction in output and new orders eased to the second weakest in nine-months (behind April), added the latest Emirates NBD Purchase Managers’ Index (PMI) survey.

On the price front, currency weakness continued to place further pressure on input costs, leading to another substantial rise in output charges.

The survey, sponsored by Emirates NBD and produced by IHS Markit, a world leader in critical information and analytics, contains original data collected from a monthly survey of business conditions in the Egyptian private sector.

Khatija Haque, head of Mena Research at Emirates NBD, said: “Egypt’s private sector appears to be stabilizing, with the PMI largely unchanged from April.  Encouragingly, new exports orders rose at the fastest rate on record in May, suggesting that the sharp devaluation of the pound in November is having a positive impact on exports.”

Key findings

Increased international demand bolsters exports
Marked contractions of output and new orders
Purchasing activity increased for the first time in 21 months

At 47.3 in May, the headline seasonally adjusted Emirates NBD Egypt Purchasing Managers’ Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – was broadly unchanged from April’s nine-month high of 47.4.  The latest reading was consistent with a solid deterioration in the overall health of the sector, albeit the second-weakest in ten months (behind April).

The solid deterioration in business conditions was mirrored by a marked fall in output, although, the rate of contraction was broadly unchanged from April (which was the weakest in nine months). Respondents cited lower demand and unfavourable economic conditions.

In contrast, new exports rose at the fastest pace since the inception of the series in April 2011. Panellists linked the rise in new export work to increased demand from international markets.

Despite a sharp rise in new export work, total new orders declined at a marked pace, although the rate of contraction was little-changed from April which was the slowest since last August. Panellists highlighted that high prices continued to contribute to weaker underlying demand conditions.

Firms reduced payroll numbers again in May, extending the current period of contraction to two years. Moreover, the rate of job shedding quickened to a solid pace. Non-oil private sector firms in Egypt commented on lower output requirements, as well as workers leaving to search for better job opportunities or to retire.

Firms engaged in input buying for the first time in 21 months during May amid positive projections for demand.

On the price front, the weakness of the Egyptian pound relative to the US dollar remained a key factor behind inflation. It was cited as the driver of higher purchasing costs, which in turn contributed to a sharp rise in overall input prices. Average staff costs also rose, albeit to a lesser extent than purchasing prices.

Consequently, output charges increased at a marked pace. The rate of inflation eased to the weakest in 15 months, however.

Firms remained strongly optimistic towards the 12-month outlook. Panellists commented on hopes of an economic turnaround, as well as stability in currency markets and market conditions. – TradeArabia News Service
 




Tags: Egypt | Emirates NBD | PMI | Non-oil private sector |

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