Egypt's PMI records 49.8 in August

CAIRO – 5 September 2021: IHS Markit Egypt Purchasing Managers’ IndexTM (PMI) rose to 49.8 in August, up from 49.1 in July.

The survey data noted that growing concerns over raw material prices and signs of a pick-up in demand led to a record expansion in purchasing activity among Egyptian firms in August.

“Input prices rose at the quickest rate for two years, leading to a sharp increase in output charges amid worries that escalating costs would dampen firms’ profits. Meanwhile, new order growth returned for the second time in three months, resulting in a slight increase in both output and employment alongside strong optimism that growth will be sustained over the coming year,” it added.

Economist at IHS Markit, David Owen stated that August saw Egyptian non-oil output and new orders creep upwards for just the second time in nine months, following a renewed upturn in June. In addition, both of these indices posted above their long-run averages for the fourth month in a row, and gave further indication that the economy is on a second phase of recovery from the pandemic after an initial rebound towards the end of 2020.

"However, PMI data also showed the widespread risk of inflation, as input prices picked up at the fastest rate since August 2019. Selling prices were raised to the greatest extent in three years, while firms also sought to create buffer stocks amid fears that costs will continue to increase. Consequently, purchasing activity rose at the strongest rate on record, although global supplier delays meant that firms are yet to see many of these inputs arrive,” Owen added.

According to the survey, panellists widely pointed to a rebound in market activity and an increase in tourism numbers as travel reopened. As a result, employment levels rose for the second month running. That said, all three indices remained close to the 50.0 neutral threshold in August, suggesting that growth rates were only marginal.

At the same time, input price inflation picked up to its highest level in exactly two years, which firms almost wholly related to rising commodity prices such as metals, timber and plastics. Higher prices correlated with the current global picture of supply shortages and delays linked to the pandemic and shipping issues. Conversely, staff costs fell for the first time in six months.

Amid fears that rising new orders and supply-side pressures would lead to further price increases, Egyptian firms sought to build their input stocks in August. Purchasing activity expanded for the first time in nine months and at the quickest pace since the series began in April 2011.

It added that with a second phase of economic recovery taking shape, over half of all surveyed firms projected output to grow over the next 12 months, linked to expected improvements in demand and capacity. As a result, the degree of positivity remained stronger than its long run trend for the fourth month running.