Company News

Emirates NBD Egypt PMI
(7 April 2019)
New orders grow for first time in seven months during March

Today sees the release of March data from the Emirates NBD Purchasing Managers’ Index™ (PMI™) for Egypt. 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, Daniel Richards, MENA Economist at Emirates NBD, said:

“Egypt’s Emirates NBD Purchasing Managers’ Index (PMI) rose to a seven-month high of 49.9 in March, just shy of the neutral 50.0 level which delineates contraction and expansion in the non-oil private sector economy. This represents a significant improvement from the 17-month low of 48.2 recorded in February, though the continued negative performance of the private sector reaffirms our decision to downgrade our 2018/19 real GDP growth forecast from 5.5% to 5.3%.

“New orders turned positive in March for the first time since August last year, which in turn saw output contract only marginally. The boost in orders appears to have been domestically driven, as export orders remained contractionary, albeit at a slightly slower pace than the multi-year low recorded in February.

“Firms were able to raise output prices for the first time this year, while input prices were at a series-low, reducing pressure on firms’ margins. Nevertheless, the employment index remained in negative territory for the sixth month running.

“Our expectation remains that there will be an improvement in the PMI reading over the remainder of the year, and that the index will begin to broach the 50.0 level more consistently, having done so just three times in 2018. This will in part be fueled by easing monetary policy; the CBE implemented its first cut of 2019 in February and we anticipate more cuts over the course of 2019. Survey respondents remain broadly positive, although future output expectations did drop moderately in March. Firms anticipate that improved tourism will be one of the contributing factors to increased output.”

The main findings of the March survey were as follows:

  • Marginal increase in inflows of new work
  • Output broadly stabilises
  • Input price inflation at record low

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 – rose from 48.2 in February to 49.9 in March, to signal a broad stabilisation of the health of the Egyptian non-oil private sector economy. The latest reading was the highest for seven months, with improvement last seen in August 2018.

Key to the uptick in the headline index was a slight rise in new orders in March. Demand for Egyptian goods and services grew for the first time in seven months, as businesses noted stronger market movement and increased tourism. New export orders continued to decline, which panellists related to a lack of foreign contracts.

With overall new orders increasing, some Egyptian businesses responded by lifting activity. The Output Index posted fractionally below the 50.0 neutral mark, as greater activity due to higher sales at a few firms was offset by reduction at others.

Meanwhile, employment at Egyptian companies fell for the sixth month running in March. Despite some firms increasing their workforce numbers, others reported lower staff levels because of retirements and people leaving for other companies. Nevertheless, panellists were still able to work through their backlogs.

Input price inflation descended to a new record low during March, particularly due to reduced price pressures on input purchases. Egyptian businesses reacted with a fractional uptick in output charges, ending a two-month sequence of declining prices.

Finally, future expectations slipped in March from February’s ten-month high. Some businesses expressed worries that stagnation in the economy would reduce activity over the coming year. Nonetheless, overall sentiment was still positive, which firms related to the upturn in new orders and a further boost to tourism.

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