Egypt's PMI dips in March for 1st time in 3 months

CAIRO – 5 April 2021: IHS Markit Egypt Purchasing Managers’ IndexTM (PMI) recorded a decline for the first time in three months, registering 48 in February, up from 49.3 in February.

According to IHS Markit, this decline signaled a modest deterioration in the health of the sector.

“This also marked the lowest reading since June 2020 and pointed to the quickest downturn since the initial impact of the coronavirus disease 2019 (COVID-19) pandemic,” it added.

It added that the decline in the headline figure was largely driven by faster reductions in output and new business at the end of the first quarter.

"Egypt's non-oil sector saw a stronger, but modest, downturn in March, extending the contraction seen since the end of 2020 and compounding worries about the economy's recovery from the pandemic. Client demand remained subdued as new order inflows fell solidly, whilst export sales dropped for the first time in three months. Consequently, employment, backlogs and input purchases fell further, although this helped to soften cost inflationary pressures,” Economist at IHS Markit, David Owen, said.

Owen added that the outlook for future business activity was more positive, as businesses predicted that economic conditions will start to pick up soon as vaccines feed through to a greater reopening of the economy. The expanding of the vaccine programme to more demographics played a key part in boosting expectations.

“Hopefully this is a sign of improving demand in the near term and a recovery in output in the second half of the year,” he noted

Egyptian businesses saw a solid fall in activity that was the most marked for nine months, while new business inflows declined at the joint-quickest rate in that same period.

According to the announced data, nearly 12 percent of survey respondents saw a fall in new work from February, often attributing this to weak market demand and ongoing COVID-19 restrictions. Meanwhile, export sales were down for the first time in three months, albeit following a survey-record upturn.

Inflationary pressures were again recorded in the March data, led by a solid increase in purchasing costs as a number of raw materials were marked up in price. Firms particularly mentioned price rises for metals, plastics and cardboard, linked to global supply problems resulting from the pandemic. Meanwhile, salary costs ticked up for the first time since last December, according to the data.

It stated that business expectations pointed to a contrasting positive picture for the Egyptian economic outlook, as over half of all respondents predicted that activity will rise in the next 12 months. Overall business optimism soared and was almost level with last July's 29-month high.

It clarified that the improvement came as the government's vaccination program was expanded to more areas of the population, fuelling hopes of a quicker return to normality than previously expected