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Egypt’s non-oil private sector plummets to lowest level since June 2020: IHS Markit

IHS Markit attributed the drop to a decline in the output index and decreased business inflows

Doaa A.Moneim , Thursday 6 May 2021
IHS
File Photo: A factory employee works in a thread spinning factory in Cairo, Egypt, July 5, 2018. REUTERS
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Egypt’s IHS Markit’s Purchasing Managers’ Index (PMI) fell from 48 in March to 47.7 in April – the second consecutive drop in four months – marking the lowest level since June 2020.

The PMI measures the operating conditions in the non-oil private sector economy.

In its report on Egypt published on Thursday, IHS said the index pointed to a moderate deterioration in the health of the non-oil economy.

IHS Markit attributed the drop to the decline in the output index, which signalled a fifth successive monthly fall in business activity in April, coupled with a further decline in new business inflows.

“Firms generally reported that weaker market conditions led to a drop in client demand. The pace of decline in output was broadly unchanged from March's nine-month record, with a similar trend seen for new orders,” according to the report.

The report also said that operating conditions in Egypt’s non-oil sector deteriorated again in April, as firms reported solid falls in output, new orders, and employment.

Meanwhile, increases in global raw material prices led to a hike in purchasing costs, with inflation accelerating to the quickest rate since September 2019 and driving a faster rise in output prices, stated the report.

The report also noted that the level of new export orders received by Egyptian firms increased solidly during April due to an improvement in activity across foreign markets.

“Nevertheless, a drop in total sales meant that overall workloads decreased at the start of the second quarter. This allowed firms to clear backlogs, and employment levels fell at the quickest rate for four months,” the report explained.

Purchasing activity saw a decrease, said the report, contributing to a solid reduction in input stocks.

A number of companies reported that higher raw material prices led them to put purchasing decisions on hold in April, instead utilising existing stocks, according to the report.

“Rising raw material costs were apparent across the non-oil private sector in April. Goods such as metals and plastics were reported as up in price, contributing to a marked increase in purchase prices,” said the report.

That said, the pace of inflation in Egypt was the fastest recorded since September 2019, which caused a sharp rise in overall input that forced many businesses to raise their selling charges –although the latest increase was notably softer than for input prices, according to the report.

Going forward, the report noted that business expectations for future output fell markedly in April, after surging upwards at the end of the first quarter of 2021 in the wake of an acceleration in the COVID-19 vaccine roll-out.

It added that the recent rise in domestic cases and concerns about financial liquidity meant that fewer businesses were optimistic of a rise in output over the next 12 months and the degree of optimism also slipped below the series average. 

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