Egyptian non-oil private sector contracts to 48.2 in May: PMI

CAIRO – 10 June 2019: Egypt’s Emirates NBD Purchasing Managers’ Index (PMI) for the non-oil private sector declined to 48.2 in May, dipping back into contraction after recording 50.8 in April.

A report issued by IHS Markit, Emirates NBD Research, said that the private sector has continued to bear the brunt of ongoing reform economic efforts in Egypt, and will likely remain under pressure over the summer period.

“While easing price growth in recent months – CPI inflation fell to 13.0 percent y/y in April – has offered some respite, upcoming subsidy reforms and a renewed pause in the CBE’s cutting cycle mean that conditions remain difficult for private firms,” it added.

“The dip back below 50 was driven by both output and new orders, both of which saw moderate declines compared to the previous month, following expansions in April. New export orders contracted at a quicker pace, with respondents citing deterioration in tourism activity,” MENA Economist Emirates NBD Daniel Marc Richards stated.

Richards added in a report that firms continued to discount in a bid to shore up demand, with output prices declining for the second month in a row.

“Although the pace of growth in purchase costs has slowed in line with inflation, it will likely accelerate in the coming months as new subsidy reforms push up energy and fuel tariffs,” he added, noting that this will continue to squeeze firms’ margins, and is reflected in a drawdown in inventories and a fall in employment, which declined at the fastest rate since October 2017.

“We maintain our outlook that conditions will improve although private Egyptian companies will remain under pressure over the summer months,” he stated.

The report also read that stronger GDP growth should bolster demand, and some of the more difficult economic reforms are behind them. Survey respondents share our view, with 38 percent anticipating an increase in activity over the year.

The survey, sponsored by Emirates NBD and produced by IHS Markit, contains data collected from a monthly survey on business conditions in the Egyptian private sector.