Thursday 04, January 2018 by Jessica Combes

Egypt PMI falls in December but posts highest quarterly average in over two years


The Egyptian non-oil private sector ended 2017 with deterioration in business conditions, though the decline over the fourth quarter as a whole was the weakest in over two years, according to Emirates NBD Egypt PMI.

Signs of economic stability and increased capital investment plans underpinned strong business confidence during December. In terms of inflation, rates of increase in input and output prices eased and registered comfortably below their respective long-run averages. Declines in output, new orders and new foreign business contributed to the latest deterioration, however.

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.

“Egypt’s PMI reading dipped back below the neutral 50.0 mark once again in December, dashing hopes that the positive November reading signalled a lasting return to expansion in the Egyptian non-oil private sector. Nevertheless, the pace of contraction was gentler than seen over most of the past several years, future sentiment remains high, and job shedding slowed to a 28-month low, boding well for 2018,” said Daniel Richards, MENA Economist at Emirates NBD.

Key Findings include headline PMI fell to 48.3, from 50.7; contractions in output, new orders and new export business; and business confidence remains strong.

At 48.3 in December, 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–fell from 50.7 in the preceding survey period. The latest reading indicated a modest deterioration of business conditions in the Egyptian non-oil private sector. Nonetheless, the contraction registered throughout the final quarter of 2017 was the slowest recorded in over two years. Furthermore, the rate of deterioration was weaker than the series’ historical average since early 2011.

Following the first expansion in output for over two years in November’s survey, activity returned to contraction during December. The rate of decline was solid but slower than seen on average over the year as a whole. Panel members in the non-oil private sector commonly cited a deterioration in inflows of new business from both foreign and domestic markets, with both new export orders and total new business returning to contraction in December.

On a more positive note, the rate of job shedding was the slowest seen for 28 months during December, and signalled only a marginal fall in employment. According to anecdotal evidence, some retiring staff were not replaced by new hires; however, these reports were partly negated by firms noting that they employed additional staff to meet output requirements.

On the price front, cost pressures faced by Egyptian non-oil private sector firms softened during December. Moreover, the rate of input price inflation eased to a 22-month low. Similarly, selling prices rose at the slowest pace since February 2016 and only marginally overall.

Stocks of purchases held by companies operating in the non-oil private sector decreased at a solid rate in the latest survey period. Firms were forced to utilise existing stocks as a result of input shortages at suppliers, according to anecdotal evidence.

Despite easing marginally since November, business confidence towards future growth prospects remained strongly positive overall. Increased capital expenditure and expected economic stability underpinned optimism during December.

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