Political and security concerns continued to weigh down performance in Lebanon’s private sector in March

How Lebanon’s private sector performed in March: Lebanese firms saw continued but marginal deterioration in business conditions in March, with output and new orders declining at slower rates, according to BlomInvest Bank’s Lebanon PMI (pdf) report for the month. The headline figure inched up to 49.4 from 49.1 in February. While still below the 50.0 cut-off separating contraction from growth, the latest figure indicates a softer rate of decline.

Lackluster demand + security concerns persist: Lower business activity was seen across Lebanon, with anecdotal evidence attributing the decline in output to weak demand, the report said. New orders fell for their eighth consecutive month, with weak client purchasing power and regional security concerns resulting in a drop in business’ volumes at the softest pace observed during the current contractionary period.

Regional security concerns hurt exports: Export demand saw faster declines in March, with the fall in new business from non-domestic customers being the quickest since December 2022, as anecdotal evidence pointed to Red Sea disruptions and the Gaza War eroding international sales, the report indicated.

Red Sea disruptions also edged inflation and hurt supply chains: Shipping and ins. costs rallied in March on the back of continued Red Sea disruptions, leading to the fastest increase in input costs since November 2023, the report said. Together with a hike in raw materials costs, these factors led firms to adjust pricing strategies and boost output prices at the quickest rate seen in seven months, passing on higher costs to consumers. Aside from effects due to Red Sea disruptions, strike action at ports also saw delays in the receipt of imports, with average input lead times lengthening to their greatest extent in almost a year. Employment also saw marginal decreases in March, the report also said.

The silver lining: The uptick in the headline figure indicates “resilience” in Lebanon’s local market, BlomInvest Bank research analyst Stephanie Aoun said in her comment to the report. Backlogs also decreased, despite lower staff capacity, as falling workloads saw firms clear existing orders.

Businesses retained a somber outlook for the next 12 months, with respondents citing regional conflicts and political uncertainty as driving subdued forecasts.

ICYMI- Kuwait released its first public PMI this March, and the UAE and Saudi Arabia’s non-oil private sectors continued to expand in March at slower rates while Egypt’s PMI rose slightly.