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Egypt PMI: New orders grow for first time in seven months
Source: ASDA'A BCW for Emirates NBD , Author: Posted by BI-ME staff
Posted: Sun April 7, 2019 3:06 pm

EGYPT. Today sees the release of March data from the Emirates NBD Purchasing Managers’ Index™ (PMI™) for Egypt. The survey, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the Egyptian private sector.

Commenting on the Egypt PMI™ survey, Daniel Richards, MENA Economist at Emirates NBD, said:“Egypt’s Emirates NBD Purchasing Managers’ Index (PMI) rose to a seven-month high of 49.9 in March, just shy of the neutral 50.0 level which delineates contraction and expansion in the non-oil private sector economy. This represents a significant improvement from the 17-month low of 48.2 recorded in February, though the continued negative performance of the private sector reaffirms our decision to downgrade our 2018/19 real GDP growth forecast from 5.5% to 5.3%.

“New orders turned positive in March for the first time since August last year, which in turn saw output contract only marginally. The boost in orders appears to have been domestically driven, as export orders remained contractionary, albeit at a slightly slower pace than the multi-year low recorded in February.

“Firms were able to raise output prices for the first time this year, while input prices were at a series-low, reducing pressure on firms’ margins. Nevertheless, the employment index remained in negative territory for the sixth month running.

“Our expectation remains that there will be an improvement in the PMI reading over the remainder of the year, and that the index will begin to broach the 50.0 level more consistently, having done so just three times in 2018. This will in part be fueled by easing monetary policy; the CBE implemented its first cut of 2019 in February and we anticipate more cuts over the course of 2019. Survey respondents remain broadly positive, although future output expectations did drop moderately in March. Firms anticipate that improved tourism will be one of the contributing factors to increased output.”

The main findings of the March survey were as follows:

• Marginal increase in inflows of new work
• Output broadly stabilises
• Input price inflation at record low

The 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 – rose from 48.2 in February to 49.9 in March, to signal a broad stabilisation of the health of the Egyptian non-oil private sector economy. The latest reading was the highest for seven months, with improvement last seen in August 2018.

Key to the uptick in the headline index was a slight rise in new orders in March. Demand for Egyptian goods and services grew for the first time in seven months, as businesses noted stronger market movement and increased tourism. New export orders continued to decline, which panellists related to a lack of foreign contracts.

With overall new orders increasing, some Egyptian businesses responded by lifting activity. The Output Index posted fractionally below the 50.0 neutral mark, as greater activity due to higher sales at a few firms was offset by reduction at others.

Meanwhile, employment at Egyptian companies fell for the sixth month running in March. Despite some firms increasing their workforce numbers, others reported lower staff levels because of retirements and people leaving for other companies. Nevertheless, panellists were still able to work through their backlogs.

Input price inflation descended to a new record low during March, particularly due to reduced price pressures on input purchases. Egyptian businesses reacted with a fractional uptick in output charges, ending a two-month sequence of declining prices.

Finally, future expectations slipped in March from February’s ten-month high. Some businesses expressed worries that stagnation in the economy would reduce activity over the coming year. Nonetheless, overall sentiment was still positive, which firms related to the upturn in new orders and a further boost to tourism.

Photo Caption: Daniel Richards, MENA Economist at Emirates NBD

About The Emirates NBD Egypt Purchasing Managers’ Index
The Emirates NBD Egypt Purchasing Managers’ Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 450 private sector companies, which have been carefully selected to accurately represent the true structure of the Egyptian non-oil economy, including manufacturing, services, construction and retail.

The panel is stratified by Standard Industrial Classification (SIC) group, based on industry contribution to GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the ‘Report’ shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the ‘diffusion’ index. This index is the sum of the positive responses plus a half of those responding ‘the same’.

The Purchasing Managers’ Index™ (PMI™) is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers’ Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease. IHS Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.

About Emirates NBD
Emirates NBD is a leading banking Group in the region. As at 30th June 2018, total assets were AED 477.5 Billion, (equivalent to approx. USD 130 Billion). The Group has a significant retail banking franchise in the UAE and is a key participant in the global digital banking industry, with over 90 per cent of all financial transactions and requests conducted outside of its branches. The bank was declared the Most Innovative Financial Services Organization of the Year at the 2017 BAI Global Innovation Awards.

The bank currently has 227 branches and 1065 ATMs and SDMs in the UAE and overseas and a large social media following, being the only bank in the Middle East ranked among the top 20 in the ‘Power 100 Social Media Rankings’, compiled by The Financial Brand. It is a major player in the UAE corporate and retail banking arena and has strong Islamic Banking, Global Markets & Treasury, Investment Banking, Private Banking, Asset Management and Brokerage operations.

The Group has operations in the UAE, the Kingdom of Saudi Arabia, Egypt, India, Singapore, the United Kingdom and representative offices in China and Indonesia.

The Group is an active participant and supporter of the UAE’s main development and community initiatives, in close alignment with the UAE government’s strategies, including financial literacy and advocacy for inclusion of People with Disabilities under its #TogetherLimitless platform. Emirates NBD Group is an Official Premier Partner of Expo 2020 Dubai.

For more information, please visit: www.emiratesnbd.com

About IHS Markit (www.ihsmarkit.com)
IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions.

 

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