The Emirates NBD Purchasing Managers' Index (PMI) for Egypt's non-oil private sector fell from 49.6 in December to 48.5 in January, the lowest level since December 2017. There were nevertheless some promising data in the sub-components that could presage an improvement in the Egyptian economy in the coming months, according to Daniel Richards, MENA economist at the Emirates NBD. PMI for Egypt, sponsored by Emirates NBD and produced by IHS Markit, contains original data collected from a monthly survey of business conditions in the Egyptian private sector. Richards said that Egypt's recovery over the past two years has so far largely been driven by external rebalancing and public investment, while the private sector has remained under pressure, in part as a result of ongoing reforms. Nevertheless, while contractionary, 2018 was on average (49.5) the strongest year in the PMI since 2014, and we anticipate a continued strengthening in the private sector this year. Weighing on the headline figure were the outsize-weighted output and new orders components, which both fell on the previous month. Richards noted that respondents cited a number of factors behind this, including adverse weather conditions, and generally poor market conditions. External demand was also weak as export orders experienced a fall for the fifth month in a row, and business optimism among respondents fell to the lowest level since October 2016. Although only 3% of respondents expected a decline in conditions over the next 12 months, with the vast majority (76%) expecting no change, optimism has declined fairly steadily from its recent peak at the close of 2017, he elaborated, noting "Global instability was among respondents' concerns." On the price front, selling charges fell for the first time in three years in January. Some firms found that weak market conditions led them to offer discounts, while others linked this to a softer rise in costs. In fact, input price inflation moderated to a record low for the series, due to falling oil and raw material prices. In addition, salary inflation was the least marked for nearly two-and-a-half years. The PMI pointed out that many firms hoped that output will improve over the coming 12 months. However, a lack of exports and uncertainty in the global economy raised doubts for others that activity will expand this year.
