Market Insights: Downturn in the Egyptian non-oil private sector softened in October, according to Emirates NBD
The latest data indicated that the downturn in the Egyptian non-oil private sector softened in October. Contractions in output, new orders and employment all eased. Meanwhile, business confidence hit a 26-month high, signalling strong optimism towards future growth prospects, with many expecting economic stability over the coming year. Furthermore, both output and input price inflation softened.
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 PMITM survey, Khatija Haque, Head of MENA Research at Emirates NBD, said:
“The headline PMI for Egypt improved in October, although it remains under the neutral 50.0 level. Output, new orders and employment declined at a slower rate in October compared with September and new export orders increased on average last month, after declining in September. Encouragingly, business optimism in October was the highest in more than two years.”
- Output and new order contractions moderate
- Price pressures ease
- Business confidence hits 26-month high
At 48.4 in October, the headline 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 47.4 in September. Deteriorating business conditions in the Egyptian non-oil private sector have been recorded in every survey since October 2015. That said, the most recent contraction was muted in comparison to the historical average.
The most recent survey indicated that output continued to decline in the Egyptian non-oil private sector, albeit at a slower pace than in September.
Panellists reported a further moderate contraction in new orders. Meanwhile, foreign demand for Egyptian products returned to growth in October. According to anecdotal evidence, weak sales in the domestic market were partly negated by an uptick in export demand from neighbouring economies in the Middle East.
On the price front, October’s survey recorded a downtick in both input and output price inflation. That said, average cost burdens faced by Egyptian non-oil private sector firms continued to rise sharply. Data suggested that input cost inflation was primarily driven by higher raw material costs, whilst staff costs rose at a slower, albeit solid pace.
Job shedding among Egyptian non-oil private sector companies continued in October, thereby extending the current sequence of contraction to 29 months. Anecdotal evidence suggested a trend of firms not replacing retiring employees. That said, the rate of decline eased in the latest survey.
After an improvement in delivery times was recorded in September, the latest data signalled a return to lengthening wait times, as has been the case throughout much of the survey so far. Firms commonly linked longer wait times with a lack of capacity at suppliers. Buying activity returned to growth in October, ending a four-month streak of contraction.
Business confidence in the Egyptian non-oil private sector was strongly positive, reaching a 26-month high in October. Firms reported that rising business investment and forecasts of economic stability underpinned optimism towards future growth prospects.