Activity in the Egyptian jobs market expanded in July 2021, indicating a rise in employment for the first time since October 2019, IHS Markit Purchasing Managers Index (PMI) survey has revealed.

Firms which took part in the survey highlighted efforts to boost business capacity after an uptick in new orders during June 2021. However, demand declined during the period as some customers remained reluctant to spend amid the continued impact of the pandemic.

That notwithstanding, the influence of rising prices of raw materials, fuel costs and employee wages on cost pressures lessened in July 2021, as the rate of input price inflation eased to a four-month low.

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 – fell from 49.9 in June to 49.1 in July 2021. The latest reading pointed to a slight deterioration in the health of the non-oil sector, and one that was softer than the series trend.

Following renewed expansions in June 2021, output and new orders indices fell back below the 50.0 neutral mark in July 2021, the report indicated. Output and demand fell for the seventh time in a row in eight months. That said, rates of declines were less significant that those observed between March 2021 and May 2021.

Survey respondents associated weaker demand conditions to a decline in domestic spending as clients remained hesitant due to ongoing COVID-19 measures. On the flip side, businesses were ‘bailed out’ by foreign clients who continued to make new orders, as global economic conditions continued to improve.

Output and new orders increase

Commenting on the latest survey results, David Owen, Economist at IHS Markit, indicated: “Employment growth across the Egyptian non-oil economy in July pointed to an improved confidence that the worst impact of the pandemic is over.

“Many businesses are now eager to boost capacity, particularly as new order growth recorded in June led to a modest pile-up of outstanding work in the latest survey period. That said, with the New Orders Index falling back into negative territory, it is clear that the economic recovery remains fragile and in need of further supportive measures to strengthen demand.”
IHS Markit

Furthermore, higher new orders recorded in June 2021 led a number of businesses to increase staffing levels in July 2021, explaining the first rise in non-oil private sector employment.

Confidence towards future output levels continued to exceed the average of the previous months in July 2021. Meanwhile, over 51 percent of the respondents noted that they expect activity to increase over the next 12 months. The overarching reason cited for this expectation was the hopes that the pandemic will end.

Similarly, supply chains in the non-oil sector improved after seven successive months of declining performance in sales. Nonetheless, with new orders falling and input stocks starting to accumulate, demand for delivery services fell as companies reduced their purchasing activity.

Input price inflation fell to the lowest since March 2021 amid weaker rises in both purchases and staff costs. Particularly, firms noted that the recent surge in raw material prices was beginning to wane, although high fuel and shipping cost posed concerns.

As a result, fewer companies raised charges on their output in July 2021 with the pace of inflation softening gradually. The report indicates that some firms offered discounts as a means to lift up client demand.