A modern building in the Sodeco neighborhood in Beirut, on July 3, 2024. Illustrative photo by Philippe Hage Boutros.
BEIRUT — Lebanon's Purchasing Managers Index (PMI) recorded a modest rebound in June, defying expectations in a bleak economic environment marked by regional instability. The index rose by 0.3 points to 49.2, after a slight dip of 0.1 points in May, signaling a slower pace of contraction in the private sector.
The improvement came despite a series of Israeli airstrikes on Beirut's southern suburbs and a 12-day war between Israel and Iran — events that have disrupted tourism and air transport across the Middle East.
With three more tenths this time, the PMI published every month by Blominvest reaches 49.2 points, indicating that the deterioration of activity felt by the private sector has lessened compared to May and that this sentiment is approaching the equilibrium point of 50 points, above which the index would reflect growth in this same activity.
With a 0.3 increase this time, the PMI, published monthly by Blominvest, reached 49.2 points — indicating that the deterioration in the private sector activity eased compared to May, and that sentiment is approaching the neutral 50-point mark. A reading above 50 signals an expansion in activity.
What is, however, less reassuring is that this is the fourth consecutive month the PMI has remained below the 50-point threshold, as highlighted by Fadi Osseiran, general manager of Blominvest, in a commentary published with the latest edition of the index.
"The escalation of the conflict between Iran and Israel has led to a decline in sales among customers and cancellations, which weighed on business activity. Moreover, the purchase prices borne by companies have increased at the fastest pace in eight months, these increases having been passed on to their customers," Osseiran said.
Increase in main sub-indices
Even more concerning is that the index measuring private sector sentiment about production prospects over the next 12 months has deteriorated significantly compared to May.
This index, published as an annex to the PMI, fell sharply from 55.3 points in May to 23.7 points in June—returning to levels seen during some of the most turbulent periods in recent years, particularly since the early months of the Gaza war. It had previously plunged even lower, approaching zero, in the wake of Lebanon’s default on Eurobond repayments.
Osseiran attributed the latest drop to the fact that 53 percent of respondents expect a decline in activity over the next year. In other words, the private sector sees little beyond a summer season it is trying to salvage, following the ceasefire between Israel and Iran that took effect on June 24 and convinced some travelers to proceed with plans to visit Lebanon.
Most of the purchasing managers surveyed also do not appear to believe, at least for now, that a deal with the International Monetary Fund (IMF) is likely — an agreement seen as essential to unlocking funds for reforms that could pull the country out of the crisis it has faced since late 2019.
Among other notable indicators, the sub-index measuring output rose by 0.7 points to 48.0, while the sub-index for new orders gained just 0.1 points to reach 48.3. New export orders increased by 0.3 points to 47.7.
Published by Blominvest, the PMI gauges the economic climate based on surveys conducted with the purchasing managers of 400 local companies, using a model and methodology that meets international standards. A reading below 50 indicates economic contraction and weak outlooks; a score above 50 reflects expansion. A month-on-month increase in the index signals improved sentiment among respondents over the period.
