Emirates NBD Egypt PMI™ July 2015

2 Min | 05 July 2015

Business conditions improve for first time so far in 2015

Cairo, July 5th, 2015: June data signalled renewed growth of Egypt's non-oil private sector, contrasting with the downward trend observed throughout the first five months of 2015. Output, new orders and new export business all increased, contributing to the overall improvement in operating conditions. That said, the rate of expansion was only slight, restricted by a modest reduction in payroll numbers and another decline in stocks of purchases. On the price front, total input costs continued to rise sharply, mainly driven by a depreciation of the Egyptian pound against the US dollar.

The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the Saudi private sector.

Commenting on the Emirates NBD Egypt PMITM, Jean-Paul Pigat, Senior Economist at Emirates NBD, said:
"June's PMI reading fits well with our view that the Egyptian economy should gradually pick up momentum heading into the second half of 2015. However, the survey also shows business activity and job creation remaining relatively tepid. Looking ahead, assuming some of the high-profile projects announced at the March investor conference break ground over the coming months, we would expect to see a further acceleration in new orders and output in H2."

Key Findings

PMI climbs above 50.0 for first time since last December
Marginal expansions in output, new orders and new export work
Cost pressures intensify amid currency weakness

Adjusted for seasonal factors, the headline 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 – posted 50.2 in June, up from 49.9 in May and above the 50.0 no-change mark for the first time this year. The latest figure was above the series average and consistent with a marginal improvement during the month. It also meant that business conditions were stable on average over the second quarter (50.0), having deteriorated in Q1 2015 (48.6).

Companies in Egypt reported a further increase in output during June, underpinned by renewed expansions in total new business and new work from abroad. The rates of growth were only fractional, however, mirroring the trend observed for the headline index. There were reports that new project opportunities had bolstered demand conditions, leading to the latest rise in activity. That said, some firms commented on a general slowdown in market conditions.

Purchasing activity also rose modestly in June, driven higher by improving order book volumes. In contrast, stocks of raw materials and semi-manufactured goods decreased for the sixth straight month. The rate of depletion was strong in comparison with historical data, albeit moderate overall.

Meanwhile, growth of output and new business had little impact on staffing levels in June, as the respective index for employment posted below neutrality for the sixth time in seven months. Monitored companies suggested that employees had left in order to search for better job opportunities. That said, the latest decline was only slight overall.

Total input costs faced by Egypt's non-oil private sector firms increased in June, as has been the case in each month since the survey began in April 2011. Underlying data highlighted a marked rise in purchasing costs as the key reason behind the overall increase, with many panellists commenting on the ongoing weakness of the Egyptian pound versus the US dollar.

As a result, output charges rose for the third time in the past four months, despite reports that some companies had reduced tariffs in an attempt to attract new clients.

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