Beirut: This report contains the twentieth 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 Markit, has been conducted since May 2013 and provides an early indication of operating conditions in Lebanon. The headline figure derived from the survey is the Purchasing Managers’ Index (PMI).

The PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30 per cent), Output (25 per cent), Employment (20 per cent), Suppliers’ Delivery Times (15 per cent) and Stocks of Purchases (10 per cent). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

The headline seasonally adjusted BLOM Lebanon PMI slipped to its lowest level for eight months in May. At 48.0, down from 49.0 in April, the index signalled a moderate deterioration in overall private sector business conditions.

Commenting on May’s PMI results, Dr Fadi Osseiran, General Manager at BLOMINVEST Bank, said, “The Lebanese private sector is undergoing an extended period of moderate contraction. Companies’ margins are pressured from all sides:  lower demand, rising business costs and a downward trend in selling prices. However, May’s PMI results show an interesting development:  the traders’ use of air and sea transport routes seems to have revived foreign demand after a period of contraction, despite the resulting higher purchase prices. Perhaps stirring economic activity will have to depend more on innovative business decisions which look beyond traditional processes.”

One factor leading the headline index to fall was a faster rate of contraction in business activity, the most marked recorded since September last year. Anecdotal evidence suggested that demand had generally weakened during the month, partly as a result of ongoing political uncertainty. Indeed, total inflows of new work fell again, and to the greatest extent for eight months. That was despite a fractional uptick in new orders from abroad, the first rise in six months.

The jobs market showed resilience amid the downturn in business activity, with employment rising fractionally following two straight months of job losses. This extra staffing capacity was a contributory factor behind a further fall in backlogs of work during May, the fifth in consecutive months.

Buying levels were reported to be higher on average than in April, in turn contributing to rising stocks. The extent of the increase in purchasing activity was slight, with some mentions among panel members of new product launches.

May survey data meanwhile showed a lengthening of suppliers’ average delivery times for the second time in the past three months, though the deterioration in vendor performance was only marginal.

Businesses’ costs rose during May for the first time since last November, albeit only marginally. An increase in average purchase prices, linked to a range of supply-side issues, was a key reason for the overall rise in cost burdens. Staff remuneration was also up in May, but at a slower rate than in April.

Average output prices, on the other hand, decreased again during May, continuing a downward trend in charges seen over ten of the past 11 months.

Source: CPI Financial