Egypt’s PMI non-oil private sector index inches up in December, closer to 2011 level

Doaa A.Moneim , Tuesday 4 Jan 2022

Egypt’s purchasing manager index (PMI) has moved closer to the 50 neutral level and is above its long-run average of 48.2 since April 2011.

Textile industry
File Photo: Women work in a factory that makes men s suits in 10th of Ramadan City, Egypt. REUTERS

The PMI non-oil private sector index reached 49 in December, up from 48.7 recorded in November, IHS Markit report said on Tuesday.

“An improvement in tourism activity supported new business, as well as a sharp rise in export orders that was the strongest since February,” the report cited.

On the other hand, the sector witnessed a weaker uptick in purchasing costs and salaries in December that caused the greatest slowdown in input cost inflation for over three years, while output charges also increased, though to a lesser degree despite the sector seeing a softening of price pressures, according to the report.

Moreover, the report highlighted the contraction in both the sector’s output and new orders, which has been the case since September, although the rates of contraction were the softest in three months.

The report’s survey showed that the sector’s businesspersons signalled a weak customer demand, which was partly associated with a rise in selling prices.

For employment in the sector’s companies, the report underlined that it continues to inch down, as companies noted that lower sales and a relatively mild increase in backlogs affected hiring activity.

"Egypt’s December PMI gave increased confidence that inflationary pressures peaked earlier in the fourth quarter of 2021 and are now beginning to soften. Input prices rose at the slowest rate since September, while the month-on-month drop in inflation was the quickest recorded for more than three years. Firms highlighted a weaker impact from raw material costs as step-downs in global commodity prices helped suppliers to adjust their own fees,” the economist at IHS David Owen explained.

Accordingly, higher selling prices continued to hinder new business volumes, which declined for the fourth consecutive month, according to Owen.

He also noted that output also fell, although the sub-index ticked closer to the 50 stabilisation mark and was above its long-run trend.

"Sentiment data showed that businesses remained relatively downbeat about their prospects in December, with confidence rising only slightly from November's 12-month low. Hopefully, a sustained drop in inflationary pressures could bolster optimism for future activity,” Owen expounded.

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