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Daniel Richards - MENA Economist
Published Date: 04 June 2018
The Emirates NBD Purchasing Managers’ Index for Egypt slipped back into contractionary territory in May, with a reading of 49.2 compared to the previous month’s 50.1. The index has been above the neutral 50.0 mark which delineates contraction and expansion in the non-oil private sector just twice in the past 32 months, and hasn’t managed two consecutive months of positive readings since H2 2015. New orders and new export orders were both under 50.0 (just, at 49.5 and 49.0 respectively), suggesting that output could remain under pressure over the coming months, albeit marginally. Nonetheless, the PMI score for May remained well above the long-term average, and while the forward-looking data is not quite as positive as it has been in recent months, it continues to point towards an ongoing improvement in the Egyptian economy.
Although the headline reading remained contractionary, there was positive news in that purchasing activity recorded its eighth consecutive expansionary month, with 16.9% of respondents noting an increase in buying levels, owing in part to business expansion and product development. This supports the fact that most businesses expect conditions to be better or the same in 12 months’ time, with the future output index reading 63.5 in May. This is a 19-month low, but this is indicative more of how much the Egyptian economy has already improved rather than an expectation that there would be a renewed deterioration. Indeed, only 2.3% of respondents expected conditions to be worse next year.
The employment index also showed signs of improvement, with the May score of 49.0 indicating the slowest pace of job-shedding since February. Respondents indicated that ongoing efforts to curb costs lay behind the decline, which has now run to three years. However, input price inflation fell to a three-year low in May at 59.0, suggesting that firms may soon be able to afford to maintain their staffing levels should the current trends continue.
Source: IHS Markit,Emirates NBD Research
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