October 3, 2019 / 4:17 AM / a month ago

Egypt's non-oil business activity contracts again in Sept -PMI

CAIRO, Oct 3 (Reuters) - Activity in Egypt’s non-oil private-sector rose fractionally in September but remained in contractionary territory for the second consecutive month, a survey showed on Thursday.

The IHS Markit Egypt Purchasing Managers’ Index (PMI) for the non-oil private sector rose to 49.5 in September from 49.4 in August, just above 2019’s monthly average of 49.3 but below the 50.0 threshold that separates growth from contraction.

Egypt’s non-oil private sector has seen growth in only two of the past 12 months, April and July.

The survey said business conditions in the non-oil private sector “deteriorated at only a marginal rate in September, as firms reduced output at a softened pace”.

Total sales fell, though export orders continued to increase, it added.

Sub-indices for output and new orders, which account for over half the index’s weighting, also continued to contract. Contraction for output slowed to 49.3 while for new orders it accelerated to 48.5.

New orders received by Egyptian companies fell for the second successive month in September, and for the fourth time in five months, it added.

Expectations for future business activity were down markedly from an 18-month high in August, with September data indicating the weakest level of positive sentiment since October 2016.

An extended fall in new orders, along with higher input prices, eased firms’ outlook for the coming year, the report said.

“A notable downside was a weakening of sentiment in September, which fell to a near three-year low. Higher prices for fuel and other raw materials dampened some firms’ expectations. Falling sales also harmed the overall outlook,” said David Owen, an economist at survey compiler IHS Markit.

“That said, panellists still expect activity to improve over the next 12 months.”

Egypt raised fuel prices in July by 16%-30%, the latest in a series of moves to reduce subsidies in line with a three-year, $12 billion loan agreement with the IMF that ends this year.

Headline inflation fell in August to a six-year low of 7.5%, having fallen from a 2019 high of 14.4% in February.

Employment increased further in September after expanding in August for the first time since April, according to the survey data.

September marked the fastest rate of employment growth for 13 months. Firms generally linked this to the need for additional labour.

Egypt is targeting economic growth of 6% in the 2019/2020 fiscal year, which began in July, slightly more than the 5.6% targeted in the 2018/2019 fiscal year.

- Detailed PMI data are only available under licence from IHS Markit and customers need to apply for a licence. To subscribe to the full data, click on the link below: here For further information, please phone IHS Markit on +800 6275 4800 or email economics@ihsmarkit.com (Reporting by Mahmoud Mourad; Editing by Aidan Lewis and Catherine Evans)

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