Egypt’s Emirates NBD Purchasing Managers’ Index (PMI) for the non-oil private sector recorded its highest level in eight months, reaching 50.3 in July, compared to 49.4 in June.
The neutral level of Emirates NBD Purchasing Managers’ Index (PMI) is 50 which delineates contraction and expansion in the non-oil private sector.
Emirates NBD research said that the real GDP growth will strengthen in 2018/2019 as there is a greater recovery in the private sector, supported by gradual monetary policy normalization, improved political stability and a rebound in the tourism sector.
The survey, sponsored by Emirates NBD and produced by IHS Markit, contains data collected from a monthly survey on business conditions in the Egyptian private sector.
“Although output remained contractionary at 49.3, it improved on the 2018 low of 48.2 recorded in June despite reported shortages in raw materials,” the report said.
It noted that the respondents to the survey cited as weighing on output were increased costs, and these were also reflected in input prices.
The input costs rose from 59.3 in June to 76.5 in August, the highest level since the last round of subsidy cuts at the start of the previous fiscal year in July 2017.
“The implementation of new subsidy cuts has seen electricity costs for factories rise by 42 percent and petrol by as much as 50 percent,” the report stated.
On June 12, Egypt cut its electricity subsidies, raising prices by an average of 26 percent in the 2018-2019 fiscal year beginning in July, followed by cutting the fuel subsidies on June 16, to support the energy by only 25 percent now.
According to the report, output prices rose from 54.2 to 57.0, marking the highest level since last August.
“At 49.8 this represented the slowest pace of job-shedding since mid-2015,” it noted.
Both new orders and new export orders were positive, at 51.2 and 50.5 respectively, over the next several months.
The report referred to the recovery in the tourism sector as investors recorded 8.3 million in 2017, marking an increase of 57.3 percent on a year on year basis, noting that the ministry of tourism expects this number to be exceeded this year.
Future output expectations among firms remains generally positive at 63.7, with 82 percent of respondents expecting that output will be the same or higher in 12 months’ time.
“The number of firms believing that this is as good as it gets has risen sharply, with 18 percent now expecting weaker output next year compared to 9.3 percent in June,” the report added.
In May, Egypt’s Emirates NBD Purchasing Managers’ Index (PMI) for the non-oil private sector hit 49.2.