Cairo – Mubasher: Business conditions of the non-oil private sector in Egypt have weakened slightly in May on the back of falling output and new orders.
The seasonally adjusted Emirates NBD Egypt Purchasing Managers’ Index (PMI) declined to 48.2 in May from 50.8 in April, according to a recent survey sponsored by Emirates NBD and produced by IHS Markit. A reading above 50 indicates expansion, while a reading below that signals contraction.
“The private sector has continued to bear the brunt of ongoing reform economic efforts in Egypt, and will likely remain over pressure over the summer period,” MENA economist at Emirates NBD, Daniel Richards, said.
Production at Egyptian non-oil firms retreated in the fifth month of 2019, ending the slight improvement recorded in April.
Nonetheless, activity dropped at a moderate rate, pressured by the decline in sales on the back of low customer demand.
“While easing price growth in recent months – CPI inflation fell to 13.0% year-on-year 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,” Richards added.
“In a bid to shore up demand, firms continued to discount, with output prices declining for the second month in a row,” he indicated.
New orders dropped modestly in May, while new export orders extended its losses for nine months driven by a lack of foreign contracts.
Employment also plunged at the strongest rate in May since October 2017 as employees left their jobs for other firms.
“Expectations toward future output weakened slightly in May, as falling output weighed on business sentiment. On the other hand, the overall level of confidence was stronger than during late-2018,” the report noted.
Although private Egyptian firms will still be under pressure over the summer months, conditions are expected to improve. About 38% of respondents to the survey also expect a rise in activity in 2019.
Higher growth in gross domestic product (GDP) will strengthen demand and some of the more difficult economic reforms are behind them.
