The downturn in the overall health of Egypt’s non-oil private sector eased in July with new orders stabilising during the month, thereby ending a 21-month sequence of decline, said the latest Emirates NBD PMI survey.

Output declined at the slowest pace in 12 months, thereby leading to only a marginal fall in input buying. In response to lower output requirements, firms reduced their staffing levels. New export orders rose for the fourth consecutive month, but only marginally during July. Meanwhile, firms saw a sharp pick-up in input cost inflation.

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.

Commenting on the Egypt PMI survey, Khatija Haque, head of Mena Research at Emirates NBD, said: “Egypt’s economy appears to be stabilizing, with new orders unchanged in July following nearly 2 years of contraction.  However, firms saw input costs rise sharply on the back of higher fuel costs as subsidies were cut further at the end of June. Inflationary pressure is likely to remain elevated as higher electricity tariffs came into effect this month.”  

Key findings

•    No change in new orders, ending 21-month sequence of decline
•    Weakest contraction in output seen in 12 months
•    Sharp input price pressures

At 48.6 at the start of the third quarter, 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 – increased from 47.2 in June. The latest deterioration was the second-weakest since the contraction in business conditions started in October 2015 and was modest overall. Moreover, the headline PMI was slightly above the long-run average.
The decline in operating conditions in the non-oil private sector showed signs of moderating, reflecting a slowdown in the contraction of output and new orders stabilising for the first time in 22 months. There were some reports of new clients wins, but this was negated by reports of higher prices continuing to weigh on underlying demand conditions.

New export orders increased for the fourth successive month during July. The rate of growth was marginal, however, and slowed to the weakest in the current sequence of expansion.

The decline in purchasing activity slowed to a marginal pace during July. Where a decline in buying activity was reported, firms linked this to lower demand levels. Due to lower buying activity, firms reduced inventories for the thirty-first consecutive month.

The ongoing downturn in output continued to feed into the labour market, as firms reduced their payroll numbers. The pace of job shedding was solid. Other panellists commented on staff either retiring or leaving in search for better job opportunities.

Input cost inflation accelerated to the fastest since January. According to underlying data, price pressures emanated from higher purchasing prices, and to a lesser extent, staff costs. Anecdotal evidence pointed to greater prices for raw materials, and energy. Reflecting higher input costs, firms raised output charges at the strongest pace since February.

Despite easing to the lowest in seven months, firms remained optimistic with regards to output growth over the next 12 months. Some companies mentioned hopes of stability in currency markets and economic conditions. – TradeArabia News Service