Egyptian non-oil private sector improves to 50.3 in July: PMI

CAIRO – 5 August 2019: Egypt’s Emirates NBD Purchasing Managers’ Index (PMI) for the non-oil private sector recorded 50.3 in July, up from 49.2 in June.

This improvement came as a result of the slight growth of output and new orders, while employment continued to fall.

The report revealed that export sales increased at the strongest rate since November 2017, adding that input cost inflation jumped due to a hike in fuel prices.

“Key to the improvement was a slight increase in activity at non-oil private sector firms in July, only the second monthly expansion in 20 months (alongside April),” it stated.

According to the report, Panellists often noted increased market activity and the introduction of new export contracts as reasons for stronger sales.

“The latest business survey for the Egyptian non-oil private sector gave some encouraging signs for activity in July. The headline PMI showed a slight improvement in operating conditions, driven by higher output and new orders,” economist at IHS Markit and author of the report David Owen said.

Owen added that a noticeable factor was an increase in contracts from foreign clients, leading to the first rise in new export orders since August 2018. “The rise in demand came from a number of countries, signaling that Egyptian businesses are growing in their competitiveness on trade.”

“Another key impact on businesses was a sharp risein fuel prices that led to increased overall input costs,” he said, adding that according to reports, domestic fuel charges wereraised by up to 30 percent across the country as thegovernment implemented further subsidy cuts tobring prices in line with the market.

Owen clarified that subsidies wereinitially introduced through IMF-led economic reformpackages that are nearing at their end. As such, it islikely that the impact on costs will be temporary, withthe rate of inflation possibly returning to its relativelylow level seen during the first half of 2019.

“Furthermore, optimism toward future output growthimproved in July. Some firms based their outlook onhopes of a strengthening Egyptian pound in thenear-term as the US dollar may fall in value throughinterest rate cuts. Overall, firms are generallypositive when regarding the future condition of theeconomy,” Owen stated.