The downturn in Egypt’s non-oil private sector was sustained for an eighth successive month in May, with business conditions worsening to the least extent in three months, according to the latest Emirates NBD PMI Index.

Rates of contraction in output, new business and employment eased since April, the survey said.

Nonetheless, each of the declines remained strong relative to its long-run trend. The weakness of the Egyptian pound against the US dollar was a factor behind economic woes, and it also contributed to substantial cost pressures. Purchase prices increased at a survey-record pace, and tariffs rose sharply as a result.  

The survey, sponsored by Emirates NBD and produced by Markit, a leading global diversified provider of financial information services, contains original data collected from a monthly survey of business conditions in the Egyptian private sector.

Jean-Paul Pigat, senior economist at Emirates NBD, said: “It’s definitely encouraging to see signs that the downturn has started to ease, as tentative as those indications may be. But the survey also continues to point to fundamentally weak demand conditions across the economy, which in light of the ongoing FX shortage, is likely to persist as we head into the start of FY2016/17.”

Key findings
•    Downturn continues but eases further
•    Slower reductions in output, new orders and employment
•    Strong cost pressures sustained thanks to currency weakness

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 – edged closer to the 50.0 no-change mark in May.

The latest reading of 47.6 was up from 46.9 in April, and above the average over the current eight-month sequence of contraction (47.0). That said, it still pointed to a solid deterioration in business conditions overall.

Falling output and new business again characterised the overall downturn in May. Both dropped solidly, though the respective rates of decline eased further from the recent records seen in March. A number of panellists commented on generally subdued market conditions. Currency depreciation was also mentioned – it contributed to high prices and liquidity shortages, both of which dampened demand.

Data showed that lower exports was another factor behind the drop in total new work. The latest reduction was the slowest in three months, but still solid overall.

Payroll numbers decreased for the twelfth consecutive month in May. There were reports that employees had left their posts in order to search for better job opportunities.

Meanwhile, the lack of liquidity in Egypt’s non-oil private sector meant that outstanding business was accumulated for the eighth month in a row. With employment still falling, the rate of backlog growth was the fastest in the series history.

Mirroring the trends observed for output and new work, purchasing activity declined at a slower rate in May. Some companies expressed a wish to downsize, leading them to reduce their input buying. Subsequently, stocks of purchases fell for the seventeenth month running, and at a sharp pace.

On the price front, the weakness of the pound against the US dollar continued to drive up costs and charges in May. In particular, with the majority of respondents (72 per cent) noting an increase since April, purchase prices rose at the steepest rate since the series started in April 2011. The rate of charge inflation was also among the quickest recorded by the survey.  – TradeArabia News Service