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Daniel Richards - MENA Economist
Published Date: 04 September 2018
The Emirates NBD Purchasing Managers’ Index (PMI) for Egypt rose to 50.5 in August, compared to 50.3 the previous month, representing a nine-month high for the index. Crucially, it was also the first time since September 2015 that the PMI had scored over 50.0 for two consecutive months. Although the index has occasionally broken into expansionary territory over the past year, it has failed to cement these gains to date, falling back below 50.0 in the following survey. The break in this pattern in August suggests that the Egyptian non-oil private sector is starting to see the protracted recovery we had projected would take hold in the current fiscal year, which began in July.
Although output was flat at 50.0 in August, this was the first month since April that it has not been contractionary, and there were positive readings in new orders and new export orders, boding well for the coming months. Although the future output index has fallen to 60.7 – a near two-year low – the majority of respondents still expect that conditions will remain the same (59.3%) or improve (31.0%) over the next 12 months. Only 9.7% expect a deterioration, down significantly from 18.0% in July. Backlogs of work saw a second consecutive period of growth, at 51.5 compared to 51.2 the previous month.
While the reform process which began in November 2016 has been positive for economic growth and stability, its implementation has placed significant strain on the private sector. Although some of these costs have been passed on to consumers – output prices have averaged 56.8 over the past two years and stood at 55.0 in August – firms have come under pressure. Further strain was introduced with new subsidy cuts in July, which pushed the input price index up to 76.5. However, the worst of this appears to have passed, and input price gains slowed to 68.5 in August. Perhaps the most encouraging data point in August’s survey was the 51.7 reading in the employment index, a high for the series, and the first positive reading since May 2015. Respondents cited inflows of new orders as a factor behind hiring new staff.
Source: IHS Markit, Emirates NBD Research
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