Egypt's PMI increases during July with rise in both activity and new orders

CAIRO – 5 August 2020: IHS Markit Egypt Purchasing Managers’ IndexTM (PMI posted 49.6 in July, up from 44.6 in June and the closest to the 50.0 neutral mark in 12 months. 

“The reading indicated a slight deterioration in business conditions, despite renewed rises in both activity and new orders,” IHS Markit stated Wednesday.

It referred to a return to activity growth in July, as non-oil private sector output rose for the first time in a year, albeit mildly. New business also expanded as export conditions improved, leading to slower declines in employment and inventories. 

According to the press release, Egyptian firms reported the first increase in output across the non-oil private sector in a year during July, as key parts of the economy such as tourism and hospitality started to reopen. Several companies raised activity as tourist numbers increased and export demand also ticked up. That said, the overall expansion in output was marginal, as nearly as many companies continued to lower activity due to ongoing structural weakness from COVID-19. However, employment at Egyptian firms fell solidly during July to continue the recent negative trend.

The outlook for future activity improved considerably in July, as firms were hopeful that the reopening of tourism could spur an economic recovery over the summer.

"While the headline index posted at 49.6, it was the Output and New Orders sub-indices that gave confidence of the start of an economic recovery in July. Both indicated monthly expansions for the first time in 12 months, after the series signalled the worst economic downturn in its nine-year history during the COVID-19 crisis,” Economist at IHS Markit, David Owen said.

Owen added that Egypt still has some way to go to return to pre-COVID levels of activity and demand though, with the recent upturns only mild overall. Moreover, job losses remained solid in July, signalling that firms are still trying hard to survive the post-lockdown market environment.

“This has not been helped by rising cost inflation, nor continued price discounting. The landscape for Egyptian businesses remains both competitive and daunting, but can be improved in the coming months should tourism and other sectors be given a boost," he clarified.