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Wednesday, 6 October 2021

Jobs and business confidence are up, but the the PMI is at a four-month low

Private sector activity hits four-month low: Business activity in Egypt’s non-oil private sector continued to contract for the tenth consecutive month in September, reaching a low not seen since May, according to the IHS Markit’s Purchasing Managers’ Index (pdf). The index dropped to 48.9 in September from 49.8 in August — a four-month low from 48.6 in May, all of which are below the 50 mark that separates contraction from expansion.

Output, demand fall: Output and new orders dropped due to weaker customer demand in September, after rising the month prior. September also marked the first time sales to foreign customers saw a significant drop since March.

It’s hardly a disaster: “While the latest PMI data pointed to non-oil output and new orders declining at the end of the third quarter, these reductions were only slight, while the two indices remained above their long-run averages for the fifth month in a row,” said IHS Markit economist David Owen.

Confidence at record high: Despite the slip in output and demand, Egyptian non-oil private sector firms reported a record level of confidence in upcoming business activity, with about 71% of respondents giving a positive forecast, indicating that firms are growing hopeful that the economy is the road to recover from the pandemic over the coming 12 months. “The rise coincided with a faster vaccination programme in Egypt and a further relaxation of travel measures that should aid tourism income in the fourth quarter,” Owen said.

Employment rose for the third successive month, despite the rate of job creation remaining mild with companies failing to find staff replacements.

Supply chains continue to be an issue: “While there was also further supply risk from lower inventory levels and raw material shortages, a record improvement in vendor performance suggests that firms may start to see procurement issues ease,” Owen said.

Firms were faced with a significant hike in prices, with the prices of raw materials rising and a renewed increase in staff costs.

Poor PMI v strong economic growth shows the continued dominance of the public sector: The PMI figures don’t reflect last year’s 3% GDP growth and the 5% GDP growth forecasted this year and that’s largely due to Egypt’s growth being driven by the government and public sector, Khatija Haque, Emirates Nbd, Chief Economist and Head of Research told Bloomberg.

The PMI figures got attention from foreign press: Reuters | Bloomberg.

ELSEWHERE IN THE REGION- Saudi Arabia’s PMI (pdf) saw a 4.5 point gain in September, its largest gain since the index started collecting data 12 years ago. The index is now at 58.6 in September, up from 54.1 in August, the strongest improvement in non-oil operating conditions since August 2015.

Private sector activity in the UAE slowed slightly, recording a PMI (pdf) reading of 53.3 in September down from 53.8 the month prior. Despite the drop, expectations improved for the first time in three months with firms expecting an increase in activity due to Dubai Expo 2020 and an easing of pandemic restrictions.

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