Egypt’s purchasing activity remained in expansion territory
Business conditions in the Egyptian non-oil private sector declined during May, with marginal declines observed for output and new orders. Meanwhile, purchasing activity remained in expansion territory, with panel members often mentioning that planned business expansions and product developments boosted input buying, according to the Emirates NBD Egypt PMI Survey.
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.
“The Emirates NBD Purchasing Managers’ Index for Egypt slipped back below the neutral 50.0 mark in May, after moving to expansion territory in April. Nevertheless, the index continues to hover around the 50.0 mark, a vast improvement on the trends observed prior to the November 2016 reforms, and while the forward-looking data is not quite as positive as it has been in recent months, it continues to point towards an ongoing improvement in the Egyptian economy,” said Daniel Richards, MENA Economist at Emirates NBD.
The 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 to 49.2 in May from 50.1 in April. Despite slipping into contraction territory, the headline figure signalled only a marginal deterioration in the health of the sector, with the headline figure remaining above its average.
May data indicated that a decline in new orders formed the basis for the contraction in the Egyptian non-oil private sector, with panel members citing weaker demand. Subsequently, a fall in business activity was reported, following stabilisation in April. Reductions in both output and new business were only marginal, however, and slower than their respective averages.
As has been the case for three years, staffing levels fell further during May. However, job shedding eased to a three-month low with, the rate of decline slower than the average across the survey history.
Elsewhere, non-oil private sector businesses expanded their purchasing activity for the eighth consecutive month during May. Panel members largely attributed the increase to planned business expansions. Moreover, the rate at which buying levels rose accelerated from April to a four-month high. May also saw a contraction in stock levels in the sector, with panellists pointing to product developments as a factor behind the fall.
On the price front, firms continued to increase their average selling prices midway through the second quarter. Moreover, the rate of charge inflation accelerated from April. Cost pressures and the stronger US dollar were key factors behind the rise in output charges, according to respondents.
Overall input prices rose, as has been observed since the inception of the survey. Anecdotal evidence attributed the rise to higher purchase and staff costs. That said, the rate of overall input price inflation softened from April to a three-year low.
Meanwhile, firms remained confident that output would increase over the coming 12 months. Planned business expansions combined with expectations of stronger underlying demand underpinned positive sentiment. However, the degree of optimism eased during May.