Lebanon PMI reaches 17-month high

Dec 05, 2014

Contraction in private business activity eased to its most marginal level in November, according to BLOM’s Purchasing Managers’ Index released Wednesday.

The BLOM PMI index, compiled by data firm Markit, climbed from 48.8 in October to a 17-month high of 49.5 in November, slightly below the critical 50 threshold. Readings above 50.0 signal growth and an improvement in business conditions on the previous month, while readings below 50.0 signal contraction. 

The headline index has gained in each of the past three months, signaling a sustained slowing of the rate of economic contraction. 

“The improvement on the security front had a positive impact on economic activity, with the PMI almost reaching its neutral level of 50,” said Marwan Mikhael, head of Research at Blominvest bank. “In fact the contraction rate has been declining since September.

“All sub-indices [of the PMI] showed an increase in the number of surveyed businesses that had no change from the previous month, emphasizing the stabilizing situation among Lebanese companies.”

According to Mikhael, this trend is expected to continue if no negative surprises occur on the political and security scenes.

November’s improvement came amid a rise in the companies’ export orders for the first time since April. The export orders index rose from 46.9 in October to 50.4 in November, while the new orders index rose from 47.5 in October to 48.7 in November.

The level of output continued to contract for the 18th month in a row but at the slowest pace so far this year. The output index increased from 47.1 in October to 48.7 this month.

November saw employment rise for a third straight month, although the pace of job creation was only marginal. The employment index stood at 50.3 in November, compared to 50.4 in October.

Businesses raised buying levels, contributing to a further, albeit slower, increase in stocks of purchases. 

Prices paid for purchased items were, meanwhile, virtually stable, following modest inflation in the prior two months. However, average staffing costs increased slightly in November, leading to a marginal overall rise in cost burdens for Lebanese businesses. This placed further pressure on profit margins, as businesses kept output prices broadly unchanged amid competitive pressures. The stabilization in output prices followed four months of decline. 

The survey data are compiled from around 400 private sector companies that represent the structure of the Lebanese economy, based on the contribution of each of the manufacturing, services, construction and retail sectors to GDP.

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