Back to the complete issue
Wednesday, 4 March 2020

Non-oil private sector continues to shrink on falling output, export orders

Non-oil private sector continues to shrink on falling output, export orders: Business activity in Egypt's non-oil private sector remained in contraction in February as export orders continued to fall and output dropped, according to the IHS Markit purchasing managers’ index (PMI) (pdf). The rate of contraction improved marginally from January, inching up to 47.1 from January’s three-year low of 46.0, but the data continues to show “broad-based weakness across output, new orders and employment,” said Phil Smith, principal economist at IHS Markit. Activity in the non-oil private sector has now shrunk for seven months in a row.

Macro conditions are weighing heavily on the private sector, which is already grappling with a “vicious cycle” of domestic market challenges, says Smith wrote. Domestically, firms are pointing to low domestic market demand underpinned by weak labor market conditions, while external demand is also weak.

Declines across output and new orders, pushing firms to cut prices: Companies have been addressing the “soft” demand and cost pressures by reducing average output prices, which Smith says is “encouraging” as firms look to break the cycle of market conditions leading to low sales and staff cuts.

Demand for raw materials dipped, reflecting in a stabilization of supplier delivery times. Prices for purchases, on the other hand, rose marginally in February for the fourth month in a row.

Recruiting fell at the fastest rate since September 2017 and the drop in buying levels was the most marked in almost three years. Overall operating expenses inched up at a modest rate that may be the slowest since April 2011.

Businesses are relatively upbeat but their enthusiasm about the next 12 months has been curbed somewhat, with the degree of optimism hitting its lowest level since last September. Respondents signaled they are concerned about how the covid-19 outbreak will impact the Chinese economy and that sentiment will take a hit. Reuters also has the story.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.