BEIRUT: Business conditions in Lebanon’s private sector economy deteriorated further in November, as signaled by the headline BLOM Lebanon Purchasing Managers Index registering a reading of 46.2. The reading suggests a contraction but is a slight uptick from a faster slowdown of 45.8 in October.
The PMI is a composite index, 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). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.
“As concerns escalated following Lebanon’s Prime Minister’s shocking resignation, November can be characterized as 2017’s most controversial month on the political front. Although the contraction was slower than that of the previous month, the resulting political tensions worsened business activity at the Lebanese private companies, which was reflected in the dropping levels of output and new orders,” said Dr. Fadi Osseiran, General Manager of BLOOMINVEST Bank.
“However, business conditions are expected to improve in the coming period as a political breakthrough is projected after Hariri suspended his resignation and fruitful political consultations took place between President Michel Aoun and the main parliamentary blocks,” he added.
Business activity fell sharply again mid-way through the final quarter of the year as firms reported a drop in demand for goods and services. Anecdotal evidence found that political instability continued to undermine economic performance, with issues around security and cash flow also playing a part in the latest contraction. To add to the situation, new export orders fell at the fastest rate for over a year.
Private sector employment also decreased during the month as businesses looked to reduce capacity in line with a lower level of demand. That said, BLOM reported, the rate at which staffing numbers contracted was only marginal and the slowest for nine months.
Additionally, November’s survey showed a moderation of inflationary pressures. Input prices rose only slightly on average, with the rate of increase noticeably slower than in each of the previous two months. This reflected both a weaker rise in purchase costs and also a slight fall in average staff pay. Prices charged for goods and services decreased for the thirty-second month in a row, and at a slightly faster rate than in October.
Lower levels of output and new orders were translated into a further decrease in businesses’ quantity of purchases in November, with the rate of decline in buying activity accelerating to the fastest seen since June. Inventories accumulated at a slower pace, while suppliers’ delivery times were broadly unchanged from the month before.
Private sector business confidence remained subdued in November, with firms (on average) forecasting output to decrease in the coming year.
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