Egypt business conditions worsen in December amid second COVID-19 wave: IHS Markit

Daily News Egypt
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Egypt business conditions worsen in December amid second COVID-19 wave: IHS Markit

Egypt’s non-oil businesses saw a renewed decline in operating conditions during December 2020, reflecting solid falls in both output and new orders, on the back of rising cases of the novel coronavirus (COVID-19).

The rise in cases sparked a commensurate reduction in client demand. Notably, the downturn led to a build-up of excess inputs, with inventories rising at the strongest rate since June 2012.

Employment cuts meanwhile accelerated to the fastest seen in four months, although increased hopes surrounding COVID-19 vaccines meant firms were more optimistic of a recovery during 2021.

The facts and figures were reported in the headline seasonally adjusted IHS Markit Egypt Purchasing Managers’ Index™ (PMI™), a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy.

The index fell below the 50.0 no-change mark in December, registering 48.2 to signal a moderate deterioration in the health of the non-oil sector. After posting 50.9 in November, the latest reading ended a three-month upturn in the economy that followed a sharp downturn caused by the pandemic.

Firms reported a solid fall in business activity at the end of the year, that was often linked to a drop in sales as customers became wary of a renewed increase in COVID-19 cases. With the possibility of tighter public health measures in the future, surveyed businesses indicated that clients had held off from completing new orders.

However, the downturns in output and sales were notably softer than those seen in each month throughout the first half (H1) of 2020. They were also considerably weaker than the nadir set in April at the height of the pandemic.

Commenting on the latest survey results, IHS Markit Economist David Owen said, “The latest PMI data pointed to a downturn in the Egyptian non-oil economy at the end of the year, reflecting a slightly depressed market environment as domestic COVID-19 cases rose again.”

Fears of a ‘second wave’ of the pandemic and renewed lockdown measures meant some businesses held off from completing new orders in December. This came despite increased optimism for the future as COVID-19 vaccines begin to be distributed around the world.

“The decline in sales was a surprise to those firms that made additional purchases earlier in the fourth quarter, as stocks of unused inputs built up at the quickest rate since mid-2012,” Owen added, “Purchasing activity was subsequently reduced sharply, while job numbers fell at the strongest rate since August.”

On the price front, Egyptian non-oil firms registered only a slight mark-up in selling charges at the end of the year, the slowest recorded in four months.

Higher charges were generally linked to the pass-through of greater costs to clients, as raw materials such as copper and iron were sharply up in price. However, some firms lowered their charges amid efforts to attract new customers.

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