Under strict embargo until: 07:30 (CAIRO) / 05:30 (UTC), November 3rd 2015
Non-oil private sector slips into decline at start of Q4
Cairo: October data pointed to a renewed downturn in Egypt's non-oil private sector economy. Business conditions worsened at the quickest pace since February, having improved in three of the previous four months. Solid reductions in output and new business were the main drivers of the overall decline, while further job losses also contributed. Moreover, the bleak picture of the sector as a whole wasn't helped by reports of another depreciation of the Egyptian pound against the US dollar. This was reflected in a sharper rise in purchase costs. In contrast, output charges fell slightly as companies attempted to secure new clients.
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:
"October's survey suggests that the Egyptian economy has slowed at the start of Q4 2015. Some of the issues that appear to be undermining output in the private sector - including problems with power supplies and the availability of FX - highlight the need to implement a more concerted program of structural reforms to boost the economy's short and long-term outlook."
Key Findings
§ PMI drops below neutral 50.0 mark to eight-month low
§ Marked reductions in output and new orders
§ Weaker currency drives purchase prices higher
After adjusting for seasonality, the headline 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 - dropped to an eight-month low of 47.2 in October, from 50.2 in September. The figure was consistent with a solid deterioration in business conditions, contrasting with the modest improvements seen in three of the four preceding months.
Underpinning the overall downturn were marked contractions in output and new orders during October. Activity decreased at the sharpest rate in eight months, amid reports of weaker-than-expected demand. This was reinforced by data for new business, which signalled the quickest fall since February. Furthermore, new export work showed a similar downward trend, with the latest decline the joint-fastest in 25 months. Panellists commented on a lack of stability both domestically and abroad.
Lower output and new orders had the knock-on effect of a fall in purchasing activity during October. Input buying decreased at a relatively strong pace, having remained stable at the end of Q3. Subsequently, the rate of pre-production inventory depletion accelerated, to the most marked since July 2013. Companies frequently mentioned drawing on input stocks instead of engaging in purchasing activity.
Non-oil private sector employment in Egypt also fell more quickly at the start of the fourth quarter. The rate of job shedding was the fastest in six months, albeit moderate overall. Backlogs of work meanwhile increased, reversing the trend seen in September. There were reports of some delays in production, leading to a build-up of outstanding business.
On the price front, total input costs rose sharply in October, helped by the steepest rise in purchase prices since March. The ongoing weakness of the Egyptian pound relative to the US dollar was cited as the key factor behind inflationary pressures. Higher costs had little impact on output charges, however, as data signalled a second successive reduction in tariffs. According to panel members, some discounts were offered in an effort to attract new customers.
-Ends-
The next Egypt PMI Report will be published on December 7th 2015 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 Jean-Paul Pigat
ASDA'A Burson-Marsteller; Dubai, UAE Senior Economist, Emirates NBD
Tel: 971-4-4507600; Fax: 971-4-4358040 Tel: 971-4-2307807
Email: tricia.rego@bm.com Email: JeanP@emiratesnbd.com
Joanna Vickers Philip Leake
Corporate Communications Economist
Markit Markit
Tel: +44-207-260-2234 Tel: +44-1491-461014
Email: joanna.vickers@markit.com Email: philip.leake@markit.com
Notes to Editors
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 30th September 2015, total assets were AED 390.4 Billion, (equivalent to approx. USD 106 Billion). The Group has a leading retail banking franchise in the UAE, with more than 220 branches and over 900 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 2015
