August PMI data signalled growth in activity and demand in Egypt’s non-oil economy for the second month in a row. Output prices rose for the first time in ten months amid a further increase in input prices.
The headline seasonally adjusted IHS Markit Egypt Purchasing Managers’ Index (PMI) - a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy - posted at 49.4 in August, down fractionally from 49.6 in July.
The latest reading signalled a deterioration in operating conditions, one that was faster than in the previous month but still only marginal.
Importantly, the headline index has risen nearly 20 points from its nadir in April at the height of the coronavirus disease 2019 (COVID-19) pandemic, suggesting that the downturn has slowed markedly.
Egyptian non-oil companies saw further increases in both output and new orders during August, building on theinitial recovery seen in July. Higher activity was registered as businesses saw a pick up in new orders and contract requests, although the rate of expansion was mild and softer than in the previous month.
Notably, some firms commented that sales remained weak as demand was slow to return to pre-COVID levels, suggesting that momentum toward an economic recovery was subdued.
On a positive note, demand from foreign customers increased in August and at the quickest pace in nearly three years. This was partly due to the reopening of tourist sites which spurred increased travel to Egypt, while firms also mentioned a rise in export contracts.
Employment continued to fall across the non-oil private sector economy in August, with the sub-component acting as the main drag on the headline index. Jobs were reduced as companies found that workloads remained relatively low. This marked the tenth successive monthly drop in employment, and one that was solid overall.
As workforces were lowered, delays to raw material imports and liquidity problems at some firms led to a fourth successive rise in outstanding work. Companies also reported a shortening of overall lead times, but one that was only slight.
Meanwhile, higher purchase prices for medical equipment and disinfectants were among the drivers of a rise in overall input costs in August. The rate of inflation dipped from July’s recent high, but was nonetheless solid. Wage costs increased at the quickest pace for six months, albeit still only mildly.