Business awaiting budget and electoral law

"In February, deterioration of the private sector's business conditions continued at the same pace as the month before."

6 March 2017 | 14:35

Source: Annahar

  • Source: Annahar
  • Last update: 6 March 2017 | 14:35

The November, 2016, BDLA business conference highlighting the ICT sector in Lebanon. (Annahar/File)

BEIRUT: The headline BLOM Lebanon PMI stayed at 47.7 in February, unchanged from January's report. That signalled another moderate deterioration in the overall health of the private sector economy in Lebanon, with the rate of decline slower than seen on average during 2016.

The Purchasing Managers' Index is a composite index; readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

The General Manager at BLOMINVEST, Fadi Osseiran, noted, "In February, deterioration of the private sector's business conditions continued at the same pace as the month before. As a matter of fact, the market was in a "wait and see" mode during the month amid talks related to the draft budget of 2017 and the awaited consensus over a new parliamentary electoral law.

He added, "For the coming months, aside from security and political concerns, contraction of economic activity is expected to linger, if no economic reforms were put in place, even if at slower rates than those of 2016."

The PMI is calculated as a weighted average of five individual sub-components: New Orders (30 percent), Output (25 percent), Employment (20 percent), Suppliers' Delivery Times (15 percent) and Stocks of Purchases (10 percent).

Lebanese firms recorded decreases in both output and new orders in February. The respective rates of decline picked up slightly since the opening month of the year, though the latest reductions were nevertheless the second-slowest seen over the past 13 months, according to the PMI report.

New export orders, meanwhile, fell only slightly and at the slowest rate in the current 19-month sequence of contraction.

On the employment front, February's survey showed virtually no change in total workforce numbers. That followed 11 consecutive months of job losses.

However, businesses did continue to pare back their quantities of purchases, which fell for the thirteenth month in a row and at a slightly faster rate than that recorded in the preceding survey period. The reduction in demand for inputs was reflected in a slight improvement in supplier delivery times, the third in as many months, while stocks of purchases rose again amid a lack of sales, according to the report.

February data showed a modest rise in average costs faced by Lebanese businesses, with the rate of increase at a four-month high. Behind this was a rise in prices paid for purchases and, to a lesser extent, higher staff costs.

PMI data also showed that businesses absorbed these higher cost burdens, however, as competitive pressures and efforts to drum up new business led to a further decrease in average prices charged for goods and services. Moreover, the rate of decline in output prices was the fastest seen for six months.

February saw a further loss of confidence among Lebanese firms towards future output prospects, with sentiment having fallen in each month since November's recent high.

The Purchasing Managers' Index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in approximately 400 private sector companies, which have been selected to accurately represent the structure of the Lebanese economy, including manufacturing, services, construction and retail.

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