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Lebanon’s non-oil business conditions deteriorated in October with escalation of the Israel-Gaza conflict a significant concern for businesses.
The headline Purchasing Managers’ Index (PMI) fell to 48.9 from 49.1, a three month-low, with anything below 50.0 indicating a decline in business operating conditions.
The BLOM Lebanon PMI, published on Friday, said new orders fell at their fastest pace since February, with supplier performance and confidence worsening during the month, with respondents to the survey saying there had been cancellations due to security concerns.
Employment however rose for a second successive month.
Dr Fadi Osseiran, General Manager at Blominvest Bank, said: “One significant factor influencing this decline was the geopolitical tension arising from the Hamas-Israel war on October 7.
“In particular, Lebanon experienced high levels of unease, as there were concerns that the country might become involved in the conflict.”
Osseiran said regional tensions created an atmosphere of economic instability, impacting the PMI for October 2023.
He said despite the tumultuous conditions, the Lebanese exchange rate held surprisingly steady throughout this challenging phase, with $1 maintained its value at 89,700 Lebanese Pounds.
“Finally, as we navigate these challenging times, it's crucial to keep a close eye on the evolving geopolitical landscape and try to evade its repercussions as best as we can,” he said.
The report said sales to non-domestic customers also fell at a slightly faster pace. Subsequently, a drop in new work intakes weighed on business activity, with output falling at a stronger rate than in September.
“Amid a sustained fall in incoming new business, October survey data highlighted a renewed month of backlog depletion across Lebanon. The decrease was the quickest since January,” the report said.
Respondents signalled a deterioration in supplier performance for the first time since May.
Future output index held fairly close to August's 41-month high. Elsewhere, the latest survey data highlighted sustained inflationary pressures, with overall input costs rising.
Anecdotal evidence suggested that firms passed on higher expenses to their customers, leading output prices to increase for a sixth month running. That said, input costs and selling charges were up only modestly, the report concluded.
(Reporting by Imogen Lillywhite; editing by Seban Scaria)
