Input price inflation eases to near record low in Egypt

Business Bureau, Gulf Today

Input price inflation in the Egyptian non-oil private sector eased to one of the weakest rates on record in November, according to the latest survey data.

The headline seasonally adjusted IHS Markit Egypt Purchasing Managers’ Index (PMI) - a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy — fell to 47.9 in November, from 49.2 in October, to indicate a decline in operating conditions that was the quickest since September 2017.

Output contracted for the fourth consecutive month. Moreover, the rate of decline strengthened to a solid pace, as businesses sought to limit activity due to a drop in new orders.

The rate at which new business fell also accelerated, with panellists linking this to a slowdown in the market. This was additionally felt by exporters, with sales to foreign clients dropping solidly despite new contracts with firms in Saudi Arabia, Greece, Morocco and other countries.

With demand falling at a sharper rate, many Egyptian firms sought to stimulate sales with a reduction in output charges.

Businesses offering discounts were helped by softer overall input cost inflation, which reached the second-slowest in the series history (ahead of March).

The overall decline was the quickest in the series history, and contrasted with a modest uptick in October.

A continued market slowdown meanwhile led to solid drops in output and new orders, as well as the first fall in employment since July.

Businesses responded with the fastest reduction in output charges in the series history.

Falling import prices, due to a stronger exchange rate against the US dollar, curbed cost.

Weaker import prices drive overall cost inflation lower New business falls at solid pace and firms cut output levels further. Selling charges decline at quickest rate in series history.

Commenting on the latest survey results, David Owen, Economist at IHS Markit, said: “The IHS Markit Egypt PMI dropped to 47.9 in November, its lowest reading in over two years, as businesses highlighted concerns over the domestic economy and new business declined for the fourth consecutive month.The downturn was extended to foreign orders, with firms noting weakness in key export markets.

“On the positive side, inflationary pressures continued to ease, with the latest mark-up in input costs being the second-softest on record.

This allowed companies to raise input buying and also lower selling prices for the first time since May. The drop in charges may see some demand restored in future months.”

The intellectual property rights to the data provided herein are owned by or licensed to IHS Markit. Purchasing Managers’ Index and PMI are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited.

IHS Markit is a registered trademark of IHS Markit Ltd and/or its affiliates.

The IHS Markit Egypt PMI is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 private sector companies.

The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. The sectors covered by the survey include manufacturing, construction, wholesale, retail and services.

Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses.

The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.

The headline figure is the Purchasing Managers’ Index (PMI).

The PMI is a weighted average of the following five indices: New Orders (30 per cent), Output (25 per cent), Employment (20 per cent), Suppliers’ Delivery Times (15 per cent) and Stocks of Purchases (10 per cent).

For the PMI calculation the Suppliers’ Delivery Times Index is inverted so that it moves in a comparable direction to the other indices.