Report: Business conditions continue to worsen in Egypt

For the third month in a row, business conditions deteriorated in Egypt’s non-oil private sector, according to businesses surveyed for the March edition of HSBC’s Purchasing Managers Index.

Driven by reductions in output and employment, the PMI for March recorded 49.6. This reading was up from February’s score of 46.8, but still signals an overall decline in operating conditions. Any score below 50 indicates that conditions worsened during the month.

The March reading brings the average PMI for the first quarter of 2015 to 48.6, the weakest level since the third quarter of 2013, the period immediately following the overthrow of former President Mohamed Morsi.

“The outlook for Egypt remains uncertain, with the depreciating pound providing a key source of instability, ” said Philip Leake, an economist at Markit, the research firm that compiles the report, in a press statement.

Production was scaled back for the third month in a row, with demand and customer turnout low, according to survey respondents. Firms continued to shed staff in March, and input costs rose thanks to a depreciating pound and high inflation. 

Despite a cheaper pound, foreign orders were down for the fourth time in the past five months, while many companies reported liquidity shortages.

On the upside, for the first time in three months, new orders rose slightly in March.

Egypt posted impressive growth figures in the first half of the 2014/15 fiscal year, with overall GDP growth at 5.6 percent. Since January, a series of metrics, including PMI, call into question whether the country will be able sustain this growth in the second half of the year.