Lebanon’s purchasing managers index (PMI) reached a five-month low of 46.6 in August, falling from 47.0 in July, indicating a deterioration in business conditions across the private sector. Moreover, firms continue to slash jobs while the country continues to grapple with a deep economic crisis..

IHS Markit’s BLOM PMI revealed that the outlook was still in ‘deeply negative’ territory, with political and economic instability, fuel shortages and eroding purchasing power among domestic clients cited as major factors causing lower demand and reduced business activity in August.

Ratings above 50 signal an improvement in business conditions, while those below signify deterioration.

IHS Markit said the latest PMI data showed the fastest reduction of new orders for five months.

It said survey respondents reported demand buffeted by falling purchasing power of domestic clients and fuel shortages impacting new business inflows.

Overseas orders also slipped back into contraction territory during August, which firms linked to political and economic instability in Lebanon, with the result that business activity fell at the fastest pace since March.

Tala Nasrallah, senior research analyst at BLOMINVEST Bank, said: “Coming into the third quarter of 2021, the impact of fuel shortages and the rising cost of the US dollar against the Lebanese pound continue to put pressure on business inflow and impose a fast reduction in new orders.

“Moreover, private sector firms continue to witness a sharp drop in demand conditions and, as a result, faster rounds of staff reduction are observed. As such, business outlook remains negative, especially given higher inflation and the shortage of dollars, leading to a low vendor performance from the business side as well as a low level of purchasing activity from domestic clients,” he added.

The report showed that firms were cutting jobs numbers for the sixth month in a row, at the fastest rate since December, while data highlighted deteriorating performances at suppliers, shown by longer average lead times for inputs.

Delivery delays were a consequence of fuel shortages and poor cash availability. Liquidity issues were also cited as a factor causing purchasing activity to fall during August.

According to the PMI data, the business outlook remained rooted in deeply negative territory during August, with many firms remarking on the difficulty in predicting their future level of business activity due to the ongoing political and economic challenges.

(Reporting by Imogen Lillywhite; editing by Seban Scaria)

imogen.lillywhite@refinitiv.com

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