Scion Industrial Engineering

Lebanon’s business conditions hit four-month high in February

Business conditions in Lebanon’s private sector improved in February to a four-month high, indicating a slower pace of deterioration, amid a relative increase in new orders and output.

The country’s Blom purchasing managers’ index (PMI), a measure of the strength of its private sector, rose to 48.8 in February, from 47.7 in January, its highest level since October.

A reading above the neutral level of 50 indicates growth while one below it points to a contraction.

“Lebanon seems to be stabilising as the latest PMI index improved noticeably, though still below the 50 threshold,” said Fadi Osseiran, general manager at Blominvest Bank.

“It is obvious that cautious positivity is driving the index, but not for long as the short-term positivity is facilitating the better-than-expected demand.”

However, the country’s political problems are taking a toll on the economy, piling pressure on the banking sector and denting business confidence amid political uncertainty, the data found.

Lebanon continues to be mired in its worst economic and financial crises in decades amid a political deadlock that has blocked the formation of a new government and the enactment of reforms required to unlock billions of dollars in aid.

“The problem in the country remains political as the presidential vacuum is taking its toll on the state, economy and, most importantly, it is pressuring the banking sector,” Mr Osseiran said.

“These developments only prove the extent to which the Lebanese crisis is inherently political at its core, and the solution lies in a political settlement that paves the way to stabilise and grow the economy for the periods ahead.”

Inflation in Lebanon hit an annual rate of about 124 per cent in January, official data showed.

Hyperinflation continued for the 31st consecutive month, led by the soaring communication, education, health, restaurant and hotel prices, as well as rising food, water and energy costs, the Central Administration of Statistics’ Consumer Price Index showed last month.

The CPI increased by about 8.43 per cent from December 2022.

Earlier this week, the country began to price goods in its supermarkets in US dollars as the value of the Lebanese pound hit new lows.

The move is an attempt by the Ministry of Economy to regulate flagrant price manipulation as the pound continues to depreciate rapidly.

Business confidence was subdued in February amid political uncertainty and price volatility, according to the PMI survey.

Overall input costs rose at the quickest pace in more than two and a half years last month as survey respondents pointed to unfavourable exchange rate movements against the US dollar.

As a result, selling charges rose at the second-fastest pace on record as companies tried to protect their margins.

The latest survey data showed a marked acceleration in overall input cost inflation, with operating expenses rising at their sharpest rate since June 2020.

The increase was mainly a result of surging purchase costs, which private companies linked to unfavourable exchange rate movements versus the US dollar.

Output prices increased during February at the second-fastest rate since data collection began in May 2013.

While new business orders fell at the softest pace in four months, weak client purchasing power continued to restrict new business wins, according to the survey.

However, private sector employment levels rose for the first time in seven months, although marginally.

Companies continued to work through their backlogs, with outstanding business volumes falling for a sixth consecutive month.