Security concerns continued to weigh on Lebanon’s non-energy private sector

How did Lebanon’s non-energy private sector perform in May? Purchasing manager index (PMI) tracking activity in Lebanon’s non-energy sector saw a decline in its headline figure for May, amid challenging domestic conditions and external headwinds from the Gaza war that dented sales and economic activity. The PMI tracked at 47.9, inching down from 48.9 in April, and marking its lowest in 16 months, according to Blominvest Bank’s Lebanon PMI (pdf) report for May.

Geopolitical tensions + security concerns continue to cause trouble: Significant declines in output, new orders, and new export orders, dragged down the headline figure. Falls in export orders were attributed to a ramp up in geopolitical tensions on the back of the ongoing Israel-Hamas war in Gaza, while drops in domestic orders came on the back of military activity in Lebanon’s south and political stagnation, BlomInvest research analyst Helmi Mrad said. The drop in new business intake was the fastest since January 2023.

Suppliers delivery times lengthened for a third successive month, with delays in the receipt of purchases from vendors due to security challenges. Stocks of inputs also fell after a modest uptick and purchasing activity was stable.

On the upside: A lack of incoming new orders allowed firms to work through backlogs which depleted at their fastest rate since November 2022. Employment was broadly stable, with staffing levels remaining relatively unchanged since August 2023. Input inflation also eased, while operating expenses inflation was marginal. Charges by private sector firms also fell for the first time in a little over a year.

Business outlook in Lebanon turned more pessimistic for the next 12 months, with respondents citing the war in Gaza as driving pessimism.

How did other MENA countries shape up in May? PMI figures tracking non-energy sectors in Egypt, Saudi Arabia, and Kuwait were broadly positive in May. Egypt’s headline figure jumped to its highest in nearly three years, ramping up to 49.6 compared to April’s 47.4 as non-oil activity began to stabilize. Kuwait’s PMI figure rose to 52.4, up from 51.5 in April. Meanwhile KSA inched down to 56.4, compared to April’s 57.0, with the report noting stiffer competition and slowing demand. UAE and Qatar’s PMIs continued to indicated expansion in May, with the UAE remaining flat at 55.3 and Qatar inching up to 53.6 from April’s 52.