Egypt’s PMI strengthens for the first time in 3 months in December

Business Bureau, Gulf Today

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 — rose for the first time in three months in December, posting 48.2, up from 47.9 in November.

This signalled a slightly softer, and only moderate, deterioration in business conditions across the Egyptian non-oil private sector.

The current run of contraction was extended to five months.

Business conditions continued to worsen across the Egyptian non-oil private sector in December, according to the latest PMI survey data, albeit to a lesser extent than in November.

Expectations about output, new orders and employment improved to the strongest since October, while inflationary pressures remained soft.

Companies reported further declines in both output and new orders, with panellists noting that market conditions remained subdued in general at the end of the year. Output levels fell solidly, with some firms mentioning that liquidity issues restricted business activity. That said, the rate of decrease was softer than in November.

Similarly, total new orders deteriorated at a slower pace in the latest survey period, one that was moderate overall. Anecdotal evidence pointed to a lack of new contracts, while demand from foreign clients fell at the steepest rate in over three years amid a difficult trade climate.

Weakening business volumes had a further negative impact on employment in December, with businesses cutting job numbers for the second consecutive month and at a faster pace than in November. Several firms noted that falling sales led them to reduce labour, with others linking the decline to not replacing voluntary leavers. Despite this, backlogs of work were unchanged.

On the positive side, cost inflationary pressures remained cool, as a strong exchange rate against the US dollar helped firms to import goods at cheaper rates. Some panellists saw input prices rise, due to higher electricity bills and customs duties. However, the overall increase in costs was slight.

As such, firms were encouraged to lower selling prices for the second successive month, with the rate of decline solid despite easing from November. Respondents noted that they hoped to gain higher sales volumes through discounting.

Purchasing activity rose marginally in December, despite falling output requirements. However, businesses reporting liquidity issues found that this led to slower deliveries and a slight reduction in overall input stocks.

Lastly, the outlook for output in 12 months’ time improved modestly at the end of the year, with the degree of optimism stronger than the average for 2019. Generally, firms remained expectant that business activity will rebound, with some relating this to new branch openings and the Egyptian pound remaining strong against the US dollar.

Purchasing Managers’ Index (PMI) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends IHS Markit (NYSE: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 per cent of the Fortune Global 500 and the world’s leading financial institutions.

IHS Markit is a registered trademark of IHS Markit and/or its affiliates. All other company and product names may be trademarks of their respective owners 2020 IHS Markit Ltd. All rights reserved. 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.