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Private business in Lebanon suffering

BEIRUT: Lebanese private firms continued to reel under the harsh economic, security and political conditions, with new data showing decline in the month of July, according to a survey conducted by BLOM Bank.

“Political uncertainty and security issues continued to dampen market demand during July, contributing to further contractions in the amount of new work placed with businesses and overall output levels. Furthermore, rates of contraction accelerated on both fronts, with the latest decrease in new orders the most marked since March. There was also a decrease in new export orders in the Lebanese private sector, the third in as many months,” according to BLOM’s Purchasing Managers’ Index.

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 carefully selected to represent the structure of the Lebanese economy, including manufacturing, services, construction and retail.

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.

July saw the seasonally adjusted BLOM Lebanon PMI fall to a four-month low of 47.9 from 49.1 in June, signaling a sharper deterioration in overall business conditions in Lebanon’s private sector.

The headline index has now posted below the neutral 50.0 mark for 13 months in a row.

The PMI showed employment levels were broadly unchanged in July following a rise during the previous month when a downturn had showed signs of easing.

A decrease in outstanding business suggested that staffing levels were more than sufficient to cope with the current levels of demand faced by businesses.

“While payrolls were kept largely unchanged, businesses reduced their purchasing in accordance with lower workloads. The degree to which buying levels dropped was only slight, however, leading to a rise in inventories as sales fell at a comparatively faster rate. The decrease in purchasing activity, albeit only slight, meanwhile contributed to a marginal improvement in suppliers’ delivery times,” BLOM added.

July’s survey showed a decrease in output prices for the sixth time in the past seven months, with the latest fall the sharpest since April and offsetting a modest rise in June.

Firms reported having lowered charges in order to encourage sales.

“Providing businesses with the scope to reduce their selling prices were low-cost pressures. Overall input price inflation ticked up since June but remained muted, with lower staffing costs negating some of the impact of modestly higher purchase prices,” the study showed.

 
A version of this article appeared in the print edition of The Daily Star on August 06, 2014, on page 5.

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Summary

Lebanese private firms continued to reel under the harsh economic, security and political conditions, with new data showing decline in the month of July, according to a survey conducted by BLOM Bank.

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).

July saw the seasonally adjusted BLOM Lebanon PMI fall to a four-month low of 47.9 from 49.1 in June, signaling a sharper deterioration in overall business conditions in Lebanon's private sector.

A decrease in outstanding business suggested that staffing levels were more than sufficient to cope with the current levels of demand faced by businesses.


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