Cairo - Mubasher: Egypt’s non-oil private sector began 2016 in much the same way that it ended 2015, with business conditions deteriorating for the fourth straight month, said Emirates NBD Egypt PMI report.
Underpinning the downturn were ongoing reductions in output, new orders and employment.
Moreover, new work from abroad fell at a marked pace, with panellists commenting on further issues surrounding security. The lack of incoming new business left firms with little pricing power, as charges were lowered in spite of another sharp rise in total input costs.
The contraction of the sector as a whole was again reflected in lower output and new work during January. Both fell simultaneously for the fourth month in a row – the longest period of joint decline in more than two years. A fragile economic climate was cited as one of the drivers of the drop in new business, and this led panellists in turn to reduce their output.
Another factor behind weaker client demand was a sharp decline in new export work related to ongoing concerns over security.
Egyptian non-oil private sector employment decreased further in January, marking an eight-month sequence of job losses. Staff had reportedly left their posts either to search for better job opportunities or take up their pensions. That said, the latest fall was the slowest since October.
Meanwhile, raw material shortages stemming from delayed shipments maintained pressure on operating capacity, albeit to only a slight extent.
Latest data on firms’ purchasing showed a similar trend to that seen for the headline index at the start of 2016. Input buying fell at a modest pace, leading to a further reduction in stocks of pre-production items. The latest drop in inventories stretched the current period of depletion to 13 months.
Overall input prices continued to rise sharply in January, as has been the case throughout the survey’s near-five year history. Higher purchasing costs were the result of another depreciation of the Egyptian pound against the US dollar, while salaries increased at the quickest rate since July 2013 as companies sought to compensate workers for inflated living costs.
Cost pressures were not passed on to consumers, however. In light of strong competition and a lack of new work, panellists cut charges in an effort to secure new clients, albeit only fractionally.
