Sunday 05 September 2021
I wrote – Yasmine Selim:
The activity of purchasing raw materials and supplies among companies expanded at a record level during the month of August compared to July, according to what was shown by the Purchasing Managers’ Index (PMI) on Sunday.
The index rose 49.8 points in August compared to 49.1 points in July, but it recorded a slight decline from last June’s highest level in 7 months.
In June, the index approached the 50-point level, which is the boundary between growth and contraction in this indicator, which is based in its study on data collected from purchasing executives in more than 400 private sector companies that represent the structure of Egypt’s non-oil economy.
A press release said today, Sunday, that the increasing concerns about the prices of raw materials and indicators of recovery in demand led to a record expansion in purchasing activity among Egyptian companies in August.
Input prices rose at the fastest rate in two years in August, leading to a sharp increase in production prices amid fears that rising costs would dampen corporate profits.
According to the statement, the growth of new orders returned for the second time in 3 months, which led to a slight increase in both production and employment, along with optimism that growth will continue during the next year.
David Owen, an economist at IHS Markit Group, said in the statement that August saw production in Egypt’s non-oil sector rise and new orders rise for the second time in 9 months, following a renewed recovery in June.
According to Owen, the production and new orders index recorded higher than their long-term averages for the fourth month in a row, and provided an additional indication that the Egyptian economy is witnessing a second phase of recovery from the epidemic after its first recovery at the end of 2020.
The statement indicated that the companies took additional steps to recover from the Corona virus pandemic, and many of them indicated the recovery of activity in the market and the increase in the number of tourists with the reopening of travel and the increase in employment levels for the second month in a row.
In August, input price inflation rose to its highest level in exactly two years, which companies linked to higher prices for basic commodities such as metals, timber and plastics.
The statement said that the price hike was linked to the current global landscape of supply shortages, pandemic-related delays and shipping problems, on the contrary, hiring costs fell for the first time in 6 months.
The statement indicated that the noticeable rise in the prices of production inputs was passed on to consumers to a much greater extent than it was in July.
Companies said higher transportation costs and tariffs pushed them up their sales prices, and they sought to increase their input inventories in August, fearing that rising new orders and pressures on supply would lead to further price increases.
More than half of the companies surveyed expected production to grow over the next 12 months, with the emergence of a second phase of economic recovery, confused by the expected improvements in demand and capacity.