Cairo-Mubasher: The contraction of Egypt’s non-oil private sector gathered pace in August, after having eased considerably at the begining of the third quarter, according to a survey sponsored by Emirates NBD and produced by IHS Markit.
Steeper declines in output, new orders and employment pushed business conditions to worsen, with the rate of job falling.
Meanwhile, firms were reluctant to engage in purchasing activityon the back of inflated costs, the statement said, adding that purchase prices reached a record high amid currency weakness.
“The August PMI figures underscore the urgency to initiate a wide-ranging economic reform program. Most importantly, the survey data highlights the ongoing need to move to a more flexible exchange rate system in order to achieve a market-clearing rate for the EGP,” according to Emirates NBD Egypt PMITM, Jean-Paul Pigat, senior economist at Emirates NBD.
The seasonally adjusted Emirates NBD Egypt Purchasing Managers’ Index (PMI) fell from 48.9 in July to 47.0 in August and posted below the crucial 50.0 threshold for the eleventh month in a row during August.
The latest reading was the lowest since April, and pointed to a solid deterioration in business conditions overall, the statement highlighted.
The index trend was reflective of sharper falls in output and new work. Both contractions fell to marginal rates in July, but the falls in August were stronger than their respective series averages. Client demand was dampened by high prices and liquidity shortages.
“The rate of overall cost inflation picked up and was close to a survey record. It was driven largely by a record rise in purchase prices, which was attributed in turn to the EGP/USD exchange rate. Charges increased sharply as a result, with cost pressures far outweighing efforts to attract new clients through discounts,” the survey highlighted.
The country’s non-oil private sector firms reported that items for purchase were unaffordable in August. Subsequently, both input buying and pre-production inventories declined at faster rates.
The unstable exchange rate affected new business from abroad in August. Exports continued to decrease for the fourteenth successive month.
Finally, the rate of job losses accelerated to the most marked since the survey started nearly five-and-a-half years ago.
