Egypt's non-oil private sector shrinks to slowest in over two years: PMI

Reuters , Tuesday 3 Dec 2019

Activity in Egypt’s non-oil private sector contracted in November for the fourth consecutive month, falling to its lowest since September 2017, a survey showed on Tuesday.

The IHS Markit Egypt Purchasing Managers’ Index (PMI) declined to 47.9 in November from 49.2 in October, well below 2019’s monthly average of 49.2 and under the 50.0 mark that separates growth from contraction.

The PMI’s decline from October to November was the biggest since May, when the index slipped back into contractionary territory after a brief expansion in April.

The non-oil private sector has expanded in just six of the past 36 months, and in only two months of the last year.

“A continued market slowdown ... led to solid drops in output and new orders, as well as the first fall in employment since July,” the PMI report said. “Businesses responded with the fastest reduction in output charges in the series history.”

Output shrank for a fourth month, with the rate of decline strengthening “as businesses sought to limit activity due to a drop in new orders”, the report said.

The output sub-index fell to 46.6 in November from 48.6 in October. Employment fell to 48.3 from 50.7, its lowest since May following three months of growth.

David Owen, an economist at survey compiler IHS Markit, said companies pointed to concerns over the local economy for the overall decline, adding that new business declined for the fourth straight month.

“The downturn was extended to foreign orders, with firms noting weakness in key export markets,” Owen said.

“On the positive side, inflationary pressures continued to ease, with the latest mark-up in input costs being the second-softest on record. This allowed companies to raise input buying and also lower selling prices for the first time since May.

“The drop in charges may see some demand restored in future months,” he added.

Nearly 40% of businesses reported a positive outlook, down from almost half a month before, “due to heightened worries about a market downturn and possible deflation”.

Egypt’s annual urban consumer price inflation fell to 3.1% in October, its lowest in nearly 14 years.

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