Egyptian companies’ optimism is waning as growing concerns that supply disruption will intensify in the coming months and its potential effect on economic recovery
Amidst continued global supply chain problems, Egypt’s non-petroleum sector contracted last month with Egypt’s IHS Markit Purchasing Managers’ Index (PMI) dropping to 48.7 from the 48.9 recorded in September.
After recording its highest in June with a 49.9, Egypt’s PMI continues to drop consistently; recording 48.9 in September, 49.8 in August, and 49.1 in July.
Attributing the fall to a solid contraction in output and the sharpest increases in both costs and charges for just over three years, IHS Markit noted that export sales fell at the fastest pace in 17 months despite recovery in local sales.
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"Having previously been less impacted than Europe and other regions, Egyptian firms started to feel the burden of material shortages on both output and inventories, with the latter decreasing at the sharpest rate in 16 months. This will likely spill over into further reductions in output by the end of the year,” explained IHS Markit Economist, David Owen.
Egyptian companies’ optimism is waning as growing concerns that supply disruption will intensify in the coming months and its potential effect on economic recovery, with acquisition difficulties for multiple raw materials and components forcing non-oil companies in Egypt to reduce output levels at the start of Q4, leading to a substantial fall in output expectations from September's record high.
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“Costs related to the purchasing of inputs meanwhile rose at the quickest pace since August 2018, pushing companies to mark up their selling charges to the greatest extent in the same time period,” said Owen.
Stocks of inputs fell to the greatest extent since June 2020, as companies commented on the need to withdraw from their inventories to support business activity.
Companies faced sharp increases in purchase prices, with metals, plastics, packaging and building materials all cited as up in price. “In fact, the rate of purchase price inflation was the fastest since August 2018, resulting in the sharpest increases in both input costs and output charges over the same time frame,” the HIS Markit report concluded.
With supplies running short, and shipment delays widening, companies raised their input buying for the third month in a row during October.
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Non-oil demand stayed strong in October, with many companies reporting improvements in sales, particularly in tourism hotspots, though rising output prices did hinder demand in some areas.
Export markets were weak, however, with latest data indicating the quickest fall in foreign orders since May 2020, which led to a marginal reduction in total new orders.
Employment numbers climbed to its highest in the last 2 years, with those surveyed noting the need to boost staff capacity following the pandemic, however backlogs of work increased for the 3rd time in four months amid input shortages.
