Lebanon suffers from sharper economic downturn

The level of business activity in Lebanon’s private sector economy fell at the end of the second quarter at the fastest rate since last October.

5 July 2017 | 13:42

Source: Annahar

  • By Annahar Staff
  • Source: Annahar
  • Last update: 5 July 2017 | 13:42

BLOM’s Lebanon PMI registered a reading of 46.1 in June, down from May’s 46.6 and its lowest score in eight months

BEIRUT: The BLOM Purchasing Managers' Index for June showed a continued and sharper downturn in the performance of Lebanon’s private sector economy.

BLOM’s PMI registered a reading of 46.1 in June, down from May’s 46.6, its lowest score in eight months, according to the report, which said the downturn was reflective of faster falls in output, new orders and employment.

PMIs are a standard economic survey, used internationally, with readings above 50.0 signaling an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.

“The PMI fell in June to its lowest level in eight months reflecting a waning consumer sentiment and pessimism amongst private sector businesses,” said Fadi Osseiran, General Manager at BLOMINVEST Bank. “The outcome of approving a new electoral law by mid-June should materialize in the coming few months especially that focus is now shifted towards 2017’s draft budget and the public sector’s salary scale.”

A composite index, 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).

According to the report, the level of business activity in Lebanon’s private sector economy fell at the end of the second quarter at the fastest rate since last October. The contraction was sharp and partly attributable to a further loss of new business. The report noted that surveyed companies generally commented on political and economic instability, while also citing a further decrease in the level of new orders from abroad. However, the rate of decline in exports was much slower than that of total new business.

Employment fell for a sixteenth straight month during June as companies adjusted to a lower level of demand. The rate of job losses was the fastest seen since March, although only modest overall. Evidence of spare capacity was shown by a further decline in backlogs of work.

There was also a reduction in firms’ purchasing activity during the month. The decrease was in fact the steepest since last October, but inventory levels continued to rise, albeit only slightly.

The survey’s price measures meanwhile showed slight falls in both average input costs and prices charged for goods and services. The reduction in cost burdens reflected lower average staff pay as well as fractional dip in prices paid for purchases, according to the report.

Average delivery times for purchased items lengthened in June, marking the third time in the past four months that deterioration in supplier performance has been recorded by the PMI.

Finally, June’s survey indicated negative sentiment among private sector businesses with regards to growth prospects in the year ahead. The degree of pessimism was less marked than in May, however, thereby ending a six-month sequence of deteriorating business morale, the report noted.

The PMI 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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