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National security concerns and weakened demand impacted business confidence in Lebanon, which saw its non-oil activity drop to its lowest level since January 2023, according to the latest Purchasing Managers’ Index (PMI) data.
The headline BLOM Lebanon PMI for June dropped to 47.8 in June, down fractionally from May’s 47.9, marking the third month in succession that the headline index has fallen, underlining the country’s domestic economic fragility and deterioration in business conditions.
The economy witnessed a dampening in new business and output levels, with survey respondents at their most pessimistic in close to a year in anticipation of a persistence in weak demand. The softer sales performances were attributed to weak client purchasing power, with an escalation in the conflict between Hezbollah and Israel at the border resulting in a decrease in new orders.
Geopolitical headwinds in the region, including Red Sea disruptions, further weighed on new business from foreign customers in June. As a result, new export orders declined for an 11th month in a row, survey data further revealed.
Employment levels remained stable in June with a slight uptick in the volume of purchases, despite output requirements decreasing.
Inflationary pressures continued across the Lebanese private sector with overall operating expenses increasing at the fastest pace in 15 months as a result of greater shipping and insurance costs, as well as higher global raw material prices.
Ali Bolbol, Chief Economist/Head of Research at BLOM, raised concern over the decline in private sector output, driven by prolonged political instability and security concerns. “As if this is not dire enough, prices also rose, caused by higher shipping and raw material costs. The only decent indicator is that employment stayed steady – maybe a sign that employers are hopeful that tourism can provide a boost to the economy,” he said.
The outlook for business activity over the next 12 months showed the “highest level of pessimism in almost a year,” according to survey data, with some companies indicating they expected demand to worsen due to lower tourism because of the conflict.
(Writing by Bindu Rai, editing by Imogen Lillywhite)
