BLOM index suggests near end of recession

Employment falls following recent
economic contraction

The downturn in the local economy seems to be reaching an end, anticipating possible growth. The latest BLOMINVEST Bank’s Purchasing Managers’ Index (PMI), published this week, signaled an easing in the rate of reduction of the Lebanese economy. The PMI is a composite business-related index, calculated as a weighted average of five individual sub-components related to business activity: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). Readings above 50 signal an improvement in business conditions from the previous month, while readings below 50 show deterioration.
The Index signals a rise in PMI to 49, from 45.1, in November 2013.

Marwan Mikhael, Head of Research at BLOMINVEST Bank said: “Although the PMI reading of 49 for December, below the 50 mark, does not mean an end to the decline in business conditions that has now stretched to six months, it does however suggest that the recession may be almost over.” Many sub-indices of the survey were above the 50 mark, including output prices, excess of work, new export orders. “Moreover, the official data had started to indicate some pick-up in economic activity, however the recent security incidents may again hinder the growing recovery,” he said.

Local companies have reported a reduction in employment for the first time in the eight months of survey data collection. However, the rate of job loss was only marginal, as some firms have continued to raise capacity in order to help launch new product lines.

The report said: “For the first time in the short survey history, local companies raised their average selling prices.” The rate of output charge inflation was only minor, however, and reflected a combination of rising input costs and the launch of new, improved product lines.

The PMI, sponsored by BLOMINVEST Bank and compiled by ‘Markit’, has been conducted, on a monthly basis since May 2013.