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Business conditions worsen for fifth straight month
Cairo, March 3rd, 2016
The downturn in Egypt's non-oil private sector was sustained in February, with business conditions worsening for the fifth month in a row. Some of the underlying data showed signs of stabilisation, however, as rates of contraction in output, new orders and new export work all eased. As a result, input buying dropped only slightly. That said, all of these variables remained on a downward path overall, while employment and pre-production inventories fell at faster rates. Charges were raised for the first time in six months in line with higher input costs, which were linked in turn to currency weakness versus the US dollar.
The survey, sponsored by Emirates NBD and produced by Markit, contains original data collected from a monthly survey of business conditions in the Egyptian private sector.
Commenting on the Emirates NBD Egypt PMITM, Jean-Paul Pigat, Senior Economist at Emirates NBD, said:
"The PMI continues to reflect relatively subdued domestic demand conditions at the start of 2016, and is consistent with other official data we have on the real economy. Some encouragement can be taken from the New Export Orders component, which despite remaining below the neutral 50-level, is nevertheless showing a slower pace of decline than in previous months."
Key Findings
§ PMI remains below 50.0 mark, but signals only modest contraction overall
§ Slower declines in output, new orders and new export work
§ Currency weakness drives up purchasing costs
At 48.1 in February, the headline 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 - was little-changed from January's reading of 48.0. The index was under the crucial 50.0 mark for the fifth month running, and pointed to a modest deterioration in overall business conditions. Though well above the 26-month low seen in November (45.0), the latest figure remained below the long-run series average (48.7).
Both output and new work continued to decline in February. The simultaneous drop was in line with the recent trend, as both have fallen in each of the past five months. The respective rates of contraction eased since January, but remained quicker than seen on average since the beginning of 2015. Subdued client demand was widely linked to fragile economic conditions, and panellists reduced their output as a result.
New business from abroad also fell in February. That said, the rate of decline moderated substantially to one that was similar to the series average. Anecdotal evidence suggested that worries about security had abated, though poor market conditions meant that exports continued to drop overall.
Egypt's non-oil private sector firms reported further job losses in February. Employment decreased for the ninth successive month, with panellists indicating that workers had left their posts in order to search for better job opportunities.
Meanwhile, the rate of contraction in purchasing activity slowed in line with that for output and new orders during February. In fact, the latest decline was negligible, with reports of falling new work only slightly outweighing those of growth. Stocks of inputs continued to contract regardless, marking a 14-month period of depletion.
Prices data signalled another sharp rise in overall input costs during February. A marked increase in purchase prices was the main driver, which firms often attributed to the weakness of the Egyptian pound against the US dollar. Average tariffs also rose for the first time in six months, albeit only marginally.
-Ends-
The next Egypt PMI Report will be published on April 5th 2016 at 07:30 (CAIRO) / 05:30 (UTC)
For further information, please contact:
Ibrahim Sowaidan
Head - Group Corporate Affairs
Emirates NBD
Telephone: +971 4 609 4113 / +971 50 6538937
e-mail: ibrahims@emiratesnbd.com
Tricia Rego
ASDA'A Burson-Marsteller; Dubai, UAE
Tel: 971-4-4507600; Fax: 971-4-4358040
Email: tricia.rego@bm.com
Khatija Haque
Head of MENA Research, Emirates NBD
Email: KhatijaH@emiratesnbd.com
Joanna Vickers
Corporate Communications
Markit
Tel: +44-207-260-2234
Email: joanna.vickers@markit.com
Philip Leake
Economist
Markit
Tel: +44-1491-461014
Email: philip.leake@markit.com
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. 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 31st December 2015, total assets were AED 406.6 Billion, (equivalent to approx. USD 110.7 Billion). The Group has a leading retail banking franchise in the UAE, with more than 220 branches and over 940 ATMs and CDMs in the UAE and overseas. 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, Egypt, the Kingdom of Saudi Arabia, Singapore, the United Kingdom and representative offices in India, China and Indonesia.
The Group is an active participant and supporter of the UAE's main development initiatives and of the various educational, environmental, cultural, charity and community welfare establishments.
About Markit
Markit is a leading global diversified provider of financial information services. We provide products that enhance transparency, reduce risk and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies. Founded in 2003, we employ approximately 4,000 people in 11 countries. Markit shares are listed on Nasdaq under the symbol MRKT. For more information, please see www.markit.com.
The intellectual property rights to the Emirates NBD Egypt PMI™ provided herein are owned by or licensed to Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit's prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information ("data") contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. Emirates NBD use the above marks under licence. Markit is a registered trade mark of Markit Group Limited.
© Press Release 2016
