This report contains the thirteenth public release of data collected from the monthly survey of business conditions in the Lebanese private sector. The survey, sponsored by Blominvest Bank and compiled by Markit, has been conducted since May 2013 and provides an early indication of operating conditions in Lebanon. The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™).

The PMI is a composite index, calculated as a weighted average of five individual sub-components: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

Business conditions in Lebanon’s private sector economy deteriorated at a slower rate in October. This was highlighted by the headline BLOM Lebanon PMI registering at a four-month high of 48.8, up from September’s 47.6. The index has posted below the critical 50.0 mark – signaling worsening economic health – for 16 months in a row.

Commenting on October’s results, Ms Maya Mantach, head of equities at BLOMINVEST Bank, said: “It appears that the Lebanese private sector remains optimistic about a coming improvement in the operating environment, despite the ongoing frail demand. This is translated through the increases seen on the supply side indicators of the PMI, as companies’ augmented their employment force and buying levels in October, the latter leading to higher inventory. Lebanese companies attribute the current weak demand to the repeated security issues in North Lebanon, and so choose to remain well prepared for the clearance of situation and an eventual pickup in demand. The PMI results in October reflected a slower decrease in demand, but further pressure may be looming in the coming month as security developments continue to dominate the headlines.”

The main findings of October’s survey were as follows:

Output continued to fall in October. The rate of contraction was the slowest since June, but nevertheless still solid. Data showed a similar trend in the amount of new work placed with businesses, which likewise fell at the weakest rate in four months. Panelists commented on a weakening of demand amid ongoing political and security issues, with a further drop in export sales also contributing to the total loss of new business.

October saw the amount of work-in-hand at businesses fall for the fourth consecutive month, albeit at only a marginal pace, and one that was slowest in the current sequence of falling backlogs.

The jobs market continued to withstand the wider economic malaise, however, with October’s survey signaling another marginal (albeit slower) rise in employment at private sector companies.

Buying levels were also resilient, up fractionally and for the first time in four months. The divergence between growing purchasing activity and reduced output requirements contributed to a further accumulation of stocks of purchases, the second in successive months.

In a bid to counter falling sales and amid growing competitive pressures, businesses reduced their output charges for the fourth month in a row in October. Furthermore, the rate of decline was slightly faster than in the previous month. Average input costs meanwhile rose, driven higher by increased purchase prices and staff costs. The rise in employee remuneration was the first in four months and, although only modest, the most marked since July 2013.