Back to the complete issue
Wednesday, 5 January 2022

PMI outlook improves, but remains in contraction territory

Egypt’s non-oil business activity “inched closer to stabilisation” in December, contracting at its slowest pace in four months, according to IHS Markit’s purchasing managers’ index survey (pdf). An easing of inflationary pressures, increase in export revenues, and uptick in tourism supported new business, though subdued demand and lower output continued to weigh on firms, pushing the gauge up to 49.0 in December from 48.7 the previous month — an improvement, but still below the 50.0 mark that separates expansion from contraction. This is the thirteenth consecutive month private sector activity has contracted.

Input cost inflation saw its fastest slowdown in over three years, due to a softening of increases in purchasing costs and wages, according to the report. “The latest Egypt PMI gave increased confidence that inflationary pressures peaked earlier in the fourth quarter and are now beginning to soften,” said David Owen, IHS Markit economist.

Weak demand and overall price hikes are still problematic: Price pressures were still strong overall, leading firms to mark up their selling prices. These higher rates were partly to blame for subdued customer demand. Business output and new orders fell for the fifth month running.

Tourism and exports had a good month: New business was supported by an improvement in tourism activity and the sharpest rise in export orders since February, according to the report. Egypt’s export revenues recorded a record USD 31 bn in 2021, according to Prime Minister Moustafa Madbouly.

Fewer jobs — though the hiring market shrank more slowly: Lower sales and a relatively mild rise in backlogs impacted hiring. However, the rate of job reduction was softer than the previous month and mostly driven by companies deciding not to replace employees who quit their jobs voluntarily, the report notes.

Global supply chain issues still have a local impact. Delivery times lengthened for the second month in a row, with suppliers unable to mitigate global bottlenecks. The supply delays meant that inventories were depleted for the fifth consecutive month, despite an increase in purchasing activity as some businesses attempted to replenish their stock. However, supply chains overall deteriorated only slightly in December, and less so than in November.

Omicron means businesses are still “downbeat” on outlook, with business confidence recording only a fractional rise from November's one-year low, says the report. Only around 23% of companies gave a positive outlook, as hopes for recovery were dampened by concerns over omicron and price hikes.

ELSEWHERE IN THE REGION- Saudi Arabia’s non-oil private sector activity fell to a nine-month low in December as omicron worries dented Saudi business confidence and new orders. The kingdom’s PMI fell to 53.9 in December from 56.9 in November, reflecting a sharp slowdown in growth even as it continued to expand for the sixteenth consecutive month.

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.