Emirates NBD Egypt PMI

Business conditions in Egypt’s non-oil private sector worsened for the third straight month in December, having improved on average in Q3. The downturn moderated since November, however, with rates of contraction in output, new orders and employment all easing. There were reports that security concerns had dampened client demand, particularly from abroad as exports dropped sharply again. Meanwhile, currency weakness relative to the US dollar remained a theme in the latest period, and it contributed to another marked rise in purchasing costs. Despite this, efforts to attract new clients meant that charges fell for the third time in four months.  

The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the Egyptian private sector.

Commenting on the Emirates NBD Egypt PMI^TM, Tim Fox, Chief Economist at Emirates NBD, said:

“The recovery in the December PMI data is encouraging, and suggests that the weak November survey was at least partly due to temporary factors, impacting tourism and external demand. As such it does not alter our view that the Egyptian economy will expand 4.2% y/y in FY2015/16.”

Key Findings

• Non-oil private sector downturn eases as PMI moves closer to 50.0 mark
• Output, new orders and employment all drop at slower rates
• Security worries continue to hamper exports

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 – posted 48.2 in December, up from November’s recent low of 45.0. The latest sub-50.0 reading was the third in succession, and meant that the average for the fourth quarter as a whole (46.8) was the lowest since Q3 2013. However, the index pointed to only a modest rate of contraction overall in December.

In line with the trend in business conditions, output and new business fell simultaneously for the third consecutive month. That said, the respective rates of decline eased since November, with some new contract wins reportedly helping to support fragile demand. Lower new work was often blamed on issues surrounding security, and data highlighted the subsequent effect on exports. New business from abroad dropped sharply, with foreign clients especially cautious in the aftermath of the Russian air disaster.

The lack of growth in total new work meant that panellists were cautious with regard to their purchasing activity in December. The latest fall was the third in as many months, though it was the least marked in that period. Pre-production inventories also declined, with panellists commenting on further withdrawals from input stocks.

Non-oil private sector employment in Egypt decreased for the seventh month running in December. Although easing since the prior month, the rate of job cuts remained solid overall. Staff retirements contributed to the fall in payroll numbers, while some workers left in order to search for better job opportunities.

On the price front, cost pressures remained sharp at the end of 2015. The rate of inflation was slower than November’s 31-month record, and in line with the series average. The weakness of the Egyptian pound compared with the US dollar was again cited as the main reason behind higher purchasing prices. However, companies decided to cut charges regardless, generally in an attempt to secure new business. The latest decline was the third in the past four months, albeit only marginal overall.