Cairo – Mubasher: Egypt’s non-oil private sector has improved in April at the fastest pace since August 2015 on the back of higher output and new orders.
The seasonally adjusted Emirates NBD Egypt Purchasing Managers’ Index (PMI) rose to 50.8 in April from 49.9 in March, according to a recent survey sponsored by Emirates NBD and produced by IHS Markit. A reading above 50 indicates expansion, while a reading below that signals contraction.
“This was the first time since August last year that the index has breached the neutral 50.0 level which delineates contraction and expansion; the private sector has struggled to expand as it has borne the brunt of the ongoing economic reform efforts in Egypt which began in late 2016,” MENA Economist at Emirates NBD Daniel Richards commented.
“The improvement from the first quarter – the PMI index averaged just 48.9 over January to March – was broad-based, with most of the index’s subcomponents returning positive 50-plus readings,” Richards added.
The Egyptian non-oil private sector companies have reported a modest expansion in business activity in April, however, the output increased for the first time since November 2017 due to an increase in demand, the report highlighted.
“However, this uptick in new orders appears to be driven by domestic demand still, as new export orders remained in negative territory. Firms appear to be shoring up domestic demand by price discounting – output prices dipped back below 50, the third time this year they have declined,” Richards said.
Moreover, new orders rose slightly last April backed by an increase in sales and new secured contracts, while foreign sales contracted at a softer rate, the report said.
Additionally, employment levels grew, marking an eight-month high, the report added, pointing out that backlogs rose marginally, “while lead times were broadly unchanged.”
Output prices were moderate in April as weak business activities in recent months made some firms cut selling charges in a bid to attract new customers, the report said.
The report highlighted that overall selling prices have changed slightly, while input cost inflation was weak.
Cost burdens accelerated in April as compared with in March as costs of living and fuel and electricity prices increased, the report indicated.
As for future output, panellists were more optimistic in April due to improvements in the private sector, according to the report.
“They [companies] appear to be more confident with regards future conditions as more respondents expect output to be greater in 12 months’ time than they did in March,” Richards said.
“This greater optimism is reflected in their hiring, as employment returned a reading above 50.0 – albeit marginally – for the first time since 2015,” he continued.
Some companies have attributed their future optimism to tourism and export markets, noting that output expectations were “the second-strongest in 12 months”, the report concluded.
