Egypt's private sector contracts for 11th consecutive month: IHS

• Published date: 06 September 2016
• Publication title: Daily News Egypt

Egypt dropped for the 11th month straight in August in the Purchasing Managers' Index (PMI), according to a report by Emirates NDB and Markit IHS.

Emirates NDB, in consort with Markit IHS, released their Markit PMI, which surveys the health of private, non-oil sectors by measuring new orders, output, employment, and suppliers' delivery times.

The country's PMI in July was 48.9, very close to the break-even score of 50.0 indicating neither a contraction nor an expansion, showing that Egypt was quickly approaching an end in its private sector recession. However, this score has fallen to 47 as a result of downturns in output, declines in new orders, sharply rising costs, material shortages, and the fastest rate of increasing unemployment since the Markit PMI survey began five and a half years ago.

Egypt's private sector contraction rapidly increased as firms were reluctant to engage in purchasing activity, largely due to inflated costs. Purchasing prices also rose to the greatest extent in the IHS' history of surveying Egypt amid endemic currency weakness. The increase in prices depressed domestic demand which was the main factor for strength in July.

Demand depressed due to higher prices and liquidity shortages. Businesses surveyed also reported difficulties in obtaining raw materials as a result of the declining value of the Egyptian pound and the appreciating US dollar.

Senior economist at Emirates NBD Jean-Paul Pigat stated: 'The August PMI figures underscore the urgency to initiate a wide-ranging economic reform programme. 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 Egyptian pound.'

Indicators fell to their lowest...