Report: Private Sector in Lebanon Continues to Deteriorate

Published August 6th, 2018 - 10:14 GMT
It cited drafters of the PMI report as saying that the uncertain political landscape, combined with cash flow issues, reportedly weighed on demand conditions in July. (Shutterstock)
It cited drafters of the PMI report as saying that the uncertain political landscape, combined with cash flow issues, reportedly weighed on demand conditions in July. (Shutterstock)

Low demand for goods and regional instability continued to take their toll on Lebanon’s private business sector in July, according to BLOMINVEST PMI report Friday.

“Business conditions in Lebanon’s private sector economy deteriorated to a sharper extent at the start of the third quarter. This was signaled by the headline BLOM Lebanon PMI falling from 46 in June to 45.4 in July, marking the lowest reading since October 2016,” the report said.

It cited drafters of the PMI report as saying that the uncertain political landscape, combined with cash flow issues, reportedly weighed on demand conditions in July.

“Survey data signaled the sharpest decline in new business for 21 months. Sales to international clients were also reduced, as instability at a broader regional level impacted foreign demand,” the report said.

The PMI report contains the latest public release of data collected from the monthly survey of business conditions in the Lebanese private sector.

The survey, sponsored by Blominvest Bank and compiled by IHS Markit, has been conducted since 2013 and provides an early indication of operating conditions in Lebanon.

“The PMI is a composite index, calculated as a weighted average of five individual subcomponents: New Orders [30 percent ], Output [25 percent ], Employment [20 percent], Suppliers’ Delivery Times [15 percent] and Stocks of Purchases [10 percent]. Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show deterioration,” the report said.

Ali Bolbol, chief economist at BLOM Bank, said that cash flow problems and regional instability have contributed to the fall in PMI the month of July of this year.

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“The July 2018 BLOM Lebanon PMI makes for a depressive reading of the index. The PMI fell to 45.4, its lowest since October 2016; and what is equally discouraging is that all subindexes settled at below 50, with the exception of the Stocks of Purchases Index. Not surprisingly, to be blamed are cash flow problems, regional instability, and an uncertain domestic political climate. Hopefully, at least the latter could be turned around with the urgent formation of a new government and the serious tackling of the dire economic conditions,” Bolbol added. The report said that the July’s fall in activity was the strongest since October 2016.

“In line with falling workloads, pressures on the supply chain were vacant during July, with average lead times for the delivery of inputs falling. Backlogs of work were also cleared as a result of reduced new business inflows,” the report said.

It added that average prices charged for goods and services were reduced by Lebanese private sector firms in July, in line with lacking demand pressures.

“That said, the rate of decrease eased for a third month running and was only fractional overall.”


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