Company News

Emirates NBD Egypt PMI
(5 May 2019)
Business conditions improve in April for first time in eight months

Today sees the release of April 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 non-oil private sector expanded at the fastest pace since August 2015 in April, as the Emirates NBD Purchasing Managers’ Index hit 50.8. 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. 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.

“Significantly, output was positive for the first time in 18 months as firms noticed stronger demand, and a positive reading for new orders for the second month in a row bodes well for this continuing over subsequent readings. 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.

“With input prices increasing at a faster rate than seen in March, firms’ margins will be squeezed by ongoing price discounting. Nevertheless, they 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, citing new projects and an improving tourism sector. This greater optimism is reflected in their hiring, as employment returned a reading above 50.0 – albeit marginally – for the first time since 2015.”

The main findings of the April survey were as follows:

  • PMI at 50.8, highest since August 2015
  • Output grows for first time in 17 months
  • New orders, employment and purchasing all increase

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 49.9 in March to 50.8 in April, signalling the first improvement in overall business conditions since August 2018. Furthermore, the PMI reading was the highest observed in over three-and-a-half years.

Central to the improvement was an expansion in business activity at the start of the second quarter of the year. Despite being modest, the rise in output was the first seen since November 2017. Panellists primarily related this to greater market movement and an increase in demand.

Concurrently, new orders saw a slight rise, as many firms reported higher sales and the securing of new contracts. This followed a marginal increase in March. Foreign sales continued to decline, albeit at a softer rate.

Egyptian firms responded to favourable domestic demand by lifting input buying during April. In addition, employment levels grew for the first time in eight months. Backlogs saw only a slight increase, while lead times were broadly unchanged.

Output prices were still restrained in April, as the run of weak activity in recent months led some businesses to reduce selling charges to attract new customers. Overall selling prices have seen little change since last November, while input cost inflation remained weak. That said, cost burdens increased at a faster pace than in March, driven by higher fuel and electricity prices and a rise in living costs.

Regarding future output, Egyptian companies were more positive in April on the back of an improving picture for the private sector. Some firms mentioned greater tourism and export markets as key reasons underpinning optimism. Output expectations were the second-strongest in 12 months.

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