Non-oil private sector companies in Egypt signalled a deterioration in overall business conditions for the 19th consecutive month in April, although instances rates of decline in output and new orders were slower, a report said.

In response to fewer output requirements, firms decreased their payroll numbers and purchasing activity, added the survey sponsored by Emirates NBD and produced by IHS Markit, a world leader in critical information and analytics. The report contains original data collected from a monthly survey of business conditions in the Egyptian private sector.

Currency weakness and a general increase in market prices were the key factors that led to increases in input costs and output charges.

The headline seasonally adjusted Emirates NBD Egypt Purchasing Managers’ Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy – rose to a nine-month high of 47.4 in April, from 45.9 in March. While this was consistent with a solid deterioration in business conditions, the rate of contraction was notably weaker than the average recorded over the current 19-month sequence of decline.

The sub 50.0 PMI reading reflected a marked decline in business activity, though the rate of contraction eased to a nine-month low. Panellists commented on weak underlying demand and poor economic conditions.

Commenting on the Emirates NBD Egypt PMI, Tim Fox, head of Research and chief economist at Emirates NBD, said: “The slower pace of deterioration in the headline Egypt PMI is an encouraging start to Q2 as it follows on from a gradually improving trend already seen through Q1.

“It reinforces the perception that after bottoming in Q4 2016 the economic situation in Egypt is beginning to stabilize. As well as being the strongest overall reading in nine months, particular comfort can be taken from the fact that the new export orders index grew for the first time in nearly two years which is likely to reflect the positive impact of a weaker exchange rate.”

Key findings

•    PMI below 50.0, but reaches nine-month high
•    Slower contractions of new orders and output
•    Growth in new export orders for first time in nearly two years

In line with the trend for output, new business across Egypt’s non-oil private sector declined at a marked, but slower, pace. High prices and currency instability continued to weigh on domestic market demand for Egyptian goods and services, according to anecdotal evidence. In contrast, new export orders rose for the first time, ending a 21-month sequence of contraction. Respondents linked the increase to opportunities arising from new export markets.

In response to fewer output requirements, firms reduced their payroll numbers, extending the run of contractions to just under two years (although the rate of job shedding eased to the weakest in 19 months). Panellists reported that some employees either retired or voluntarily left their jobs to search for better opportunities.

Reduced volumes of incoming new business discouraged firms to raise their input buying. Subsequently, stock of purchases reduced again in April.

On the price front, the weakness of the Egyptian pound relative to the US dollar and a general increase in market prices continued to be key factors behind upward inflationary pressures. Despite easing to a 14-month low, the rate of overall input price inflation remained sharp. In general, companies that raised output charges commented on the pass through of greater cost burdens to clients. The rate of charge inflation was marked but also eased to the weakest in 14 months and was much weaker than the average recorded in this current sequence of inflation. – TradeArabia News Service