BLOM Lebanon PMI: Slowest deterioration in business conditions for one year

The BLOM Lebanon Purchasing Managers’ Index (PMI) increased from 46.5 in January 2019 to 46.9 in February as output and new orders declined at a slower pace, the slowest in a year.

On January 31st the Lebanese government was finally formed after nearly 9 months of political deadlock. The news were positively priced in the market as the BLOM Bond Index has so far gained 4.24% since year-start and the yields on the Lebanese Eurobonds maturing in 5 and 10 years eased from 11% at the end of 2018 to a range of 9.7% – 9.9% in the first two months of 2019. The 5 Year Credit Default Swaps also retracted from a mid-price of 820 basis points (bps) at the end of 2018 to 697 bps as of March 4th 2019.

However, it takes time for confidence to translate into improvements in the real economy. For now, the available real economic indicators are still relevant to the month of January, a period where the government formation was not yet complete.

The real estate and construction sectors are still showing signs of ailing activity. According to the Orders of Engineers in Beirut and Tripoli, the total number of construction permits fell by a yearly 27.44% to reach 841 in the first month of 2019. Accordingly, the Construction Area Authorized by Permits (CAP) also slipped by an annual 38.33% to 501,955 square meters (sqm). According to the data from the General Directorate of Land Registry and Cadastre (LRC), the number of real estate (R.E) transactions, which may include one or more realties, reached  3,667 transactions in January 2019, down from 5,346 in January 2018. As such, the total value of total RE transactions fell by a yearly 26.25% to stand at $504.73M compared to the same period last year.

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