Business activity in Egypt grew in June after three months of contraction, a survey showed on Thursday, a tentative sign the economy may be picking up after elections that catapulted former army chief Abdel Fattah al-Sisi into the presidency. Egypt's economy has been hit by more than three years of political and economic turmoil after the 2011 uprising that toppled Hosni Mubarak after 30 years in power. The government is walking a fine line in trying to boost revenues and cut the deficit while attracting investors. The HSBC Egypt Purchasing Managers Index (PMI) for the non-oil private sector stood at 51.5 points in June, reaching a six-month high and rising from 48.7 in May. Readings above 50 indicate expansion, while those below 50 point to contraction. The index had been below 50 for 13 months through October. "It would be dangerous to read too much into a single month's data, but the June readings provide the first concrete signs that political stabilisation may finally be opening the way for an improvement in economic performance," said Simon Williams, Chief Economist for the Middle East at HSBC. "The positive readings for output, new orders and purchases all point to a pick up in demand and in sentiment. The gains in salaries also suggest that the labour market may have finally started to turn." Egypt announced cuts in energy subsidies in its revised budget for the 2014/15 fiscal year that started on Tuesday, to help narrow a deficit which is seen contracting slightly to 10 % of gross domestic product. The government expects the economy to grow by more than 3 percent in 2014/15, after around 2 % growth seen for the fiscal year which ended this week. Egypt is targeting economic growth of up to 5.8 % in the next three years with the deficit staying around 10 %. The PMI survey of around 350 private-sector firms showed output expanded for the first time since March, with the related subindex up at 52.3 points in June from 47.5 a month earlier. The subindex for new orders also hit 52.3 points, up from 48.5 points in May. New export orders expanded for the first time in five months, with the subindex at 51.9 points compared with May's 47.0 points. Businesses cut staff in June at a slower pace than in May. Output prices fell with that subindex at 49.5 points, broadly in line with May's figures. Input prices rose again with the index at 59.3 points, squeezing company margins faster than in May when it stood at 56.5 points. Source: Reuters
