Egypt's non-oil private sector continued to deteriorate during June but at a modest pace that was broadly in line with the trend observed throughout the second quarter of 2017, a survey conducted by Emirates NBD Egypt revealed. Emirates NBD Egypt Purchasing Manangers' Index (PMI) gauge came in 47.2 in June, broadly similar to last month's reading 47.3. "Egypt's non-oil business continued to deteriorate during June — its 21st consecutive month — but at a modest pace that was broadly in line with the trend observed throughout the second quarter (Q2) 2017," said the report. Firms continued to cite weak domestic demand conditions as weighing on activity and new order growth, said the Head of MENA Research at Emirates NBD Khatija Haque. Meanwhile, the survey noted that new export orders grew for its third consecutive month as weaker pound draws interest from overseas markets. "Growth in new export orders continued for the third month in succession amid reports of greater interest from international markets. Currency weakness led to further input price pressures, and firms raised average selling prices but at the slowest pace in 16 months," the report said. The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the Egyptian private sector. However, firms continued to cite weak domestic demand conditions as weighing on activity and new order growth. The latest index reading signalled a solid deterioration in the overall health of the sector. However, the PMI average for the 2Q of 2017 (47.3) was the highest since Q3 2016 and considerably better than those seen around the turn of 2017. The overall downturn in the non-oil private sector was led by a sharp fall in output, although the rate of contraction was only slightly below April's nine-month low. Panellists linked the fall in business activity to weak underlying demand conditions. New orders contracted at a marked pace, but at the joint weakest in the past ten months. Unfavourable economic conditions and high prices continued to weigh on domestic demand, according to anecdotal evidence. New exports rose for the third successive month in June amid reports of new contract wins from overseas markets. Firms continued to cut payroll numbers in June, although the rate of job shedding eased from the prior month and was only modest. The non-oil private sector saw a renewed contraction in purchasing activity. Subsequently, input stocks fell sharply, as firms continued to draw on existing stocks amid reports of high raw material prices. On the price front, sharp input price pressures were predominantly driven by currency weakness relative to the US dollar, although the rate of inflation was the second-weakest in 16 months. A sharp rise in output charges was observed in June, although the rate of inflation eased to the weakest in 16 months. Firms remained optimistic regarding business prospects over the coming year. Respondents commented on hopes of stability in currency markets and economic conditions, alongside projections of new contracts as the key reasons behind business confidence.
