Survey: Business conditions deteriorate in July

Business conditions worsened in July, according to a survey of Egypt’s non-oil private sector. The country’s Purchasing Manager’s Index slipped to 49.2 during the month, dropping below the neutral 50.0 mark.

In June, Egypt saw the first positive score in 2015, with an index of 50.2.

“The drop in July’s survey came in below expectations, and hence raises the possibility that Egypt’s macroeconomic recovery may have stalled at the start of FY2015/16,” according to a press statement from Jean-Paul Pigat, Senior  Economist at Emirates NBD, which sponsored the study.

Egypt began the 2014/15 financial year with strong first quarter GDP growth of 6.8 percent. Growth slowed to 4.3 percent in the second quarter and 3 percent in the third. Figures have not yet been released for the fourth quarter, which ended June 30, but economists predict a further decline.

Firms surveyed for the Purchasing Manager’s Index reported that security concerns dampened demand, causing them to scale back production during the month. As a result, output fell along with demand.

Companies reported higher input costs, and export business also contracted slightly during the month.

Firms also reported having fewer workers on the payroll, even as the rate of salary growth picked up to a two-year high.

Despite an overall decline in conditions, Pigat said NBD remains optimistic about the coming months. “Assuming  the  two  biggest  factors  that  are  undermining  private  sector  business  activity  at  the moment – security risks and FX liquidity shortages – improve in the coming months, we would be optimistic that growth momentum can accelerate in H2.”