- Currency depreciation continues to drive input costs higher
The headline seasonally adjusted 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 - slipped below the neutral 50.0 mark to 49.2 in July. The latest figure signalled a return to contraction for Egypt's non-oil private sector, following the first improvement of 2015 seen in the previous month (50.2). That said, it remained above the long-run series average, and pointed to only a fractional worsening in business conditions.
The fall in the headline index was partly driven by reductions in output and new orders during July. Although modest, the respective declines contrasted with expansions recorded in the previous month and over the second quarter on average. Concerns over security were reported to have dampened demand, leading firms to scale back production.
A lack of new export work also contributed to subdued demand conditions in July. New export business fell for the second time in the past three months, although the rate of contraction was only slight.
Payroll numbers at Egypt's non-oil private sector firms decreased for the second straight month in July. The rate of job shedding was faster than in June and broadly in line with the historical average, albeit modest overall. According to panellists, workers left their posts to either search for better job opportunities or take up their pensions.
Meanwhile, purchasing activity declined for the first time since February, mirroring the trend observed for new work intakes. As a result, pre-production inventories were depleted further, as has been the case in every month so far this year.
On the price front, the weakness of the Egyptian pound continued to place upward pressure on purchasing costs in July, leading to another sharp rise in overall input prices. Moreover, data indicated that higher wages added to inflationary pressures, with the rate of salary growth picking up to a two-year high.
Finally, higher input costs led to further charge inflation in July. The latest rise in tariffs was only slight, however, and broadly similar to the average recorded since the survey began in April 2011. Some companies saw their pricing power diminish as they attempted to attract new clients.
The next Egypt PMI Report will be published on September 3rd 2015 at 07:30 (CAIRO).
The Emirates NBD Egypt Purchasing Managers' Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 450 private sector companies, which have been carefully selected to accurately represent the true structure of the Egyptian non-oil economy, including manufacturing, services, construction and retail. The panel is stratified by Standard Industrial Classification (SIC) group, based on industry contribution to GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the 'Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the 'diffusion' index. This index is the sum of the positive responses plus a half of those responding 'the same'.
The Purchasing Managers' Index™ (PMI™) is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers' Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.
Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease. Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.
About Emirates NBD
Emirates NBD is a leading banking Group in the region. As at 31st March 2015, total assets were AED 367.5 billion, (equivalent to USD 100). The Group has a leading retail banking franchise in the UAE, with more than 215 branches and over 889 ATMs and CDMs in the UAE and overseas. It is a major player in the UAE corporate and retail banking arena and has strong Islamic banking, Global Markets & Treasury, Investment Banking, Private Banking, Asset Management and Brokerage operations.
The Group has operations in the UAE, Egypt, the Kingdom of Saudi Arabia, Qatar, Singapore, the United Kingdom and representative offices in India, China and Indonesia.
The Group is an active participant and supporter of the UAE's main development initiatives and of the various educational, environmental, cultural, charity and community welfare establishments.
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The intellectual property rights to the Emirates NBD Egypt PMI™ provided herein are owned by or licensed to Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit's prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information ("data") contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. Emirates NBD use the above marks under licence. Markit is a registered trade mark of Markit Group Limited.
For further information, please contact:
Head - Group Corporate Affairs
Telephone: +971 4 609 4113 / +971 50 6538937
ASDA'A Burson-Marsteller; Dubai, UAE
Tel: 971-4-4507600; Fax: 971-4-4358040
Senior Economist, Emirates NBD
© Press Release 2015