Lebanon’s purchasing managers index (PMI) strengthened to 49.0 in December 2013 from 45.1 the month before, signalling a substantial easing in the rate of contraction of the Lebanese economy, a survey compiled by Markit Economics for Blominvest Bank showed on January 7. Lebanon’s PMI, which remains below the 50.0 benchmark, now stands at a level indicative of only a modest pace of decline, according to Markit. The rates of contraction in output and new orders slowed sharply in December while employment fell following recent economic contraction. Markit underscored that the December PMI signalled a mild retreat in overall economic output, sharply contrasting with the severe reduction reported in November.

Lebanese companies indicated that although political and security concerns continue to weigh on the economy, they had weighed less heavily on business activity than during November. Weak demand, however, continued to undermine output, Markit noted. The level of incoming new orders reportedly fell at a solid pace in December, albeit to a much lesser extent than one month earlier. The strained political and economic situation in Northern Lebanon amid sporadic violent clashes continued to be felt on the domestic market, the pollster said. Lebanon’s outlook, however, was lifted by rising new export orders, which stabilised following a seven-month period of continuous decline. Lebanese companies reported a reduction in employment for the first time in the eight months of survey data collection during December. But the rate of job loss was only marginal, as some firms continued to raise capacity in order to help launch new product lines, according to Markit.

For the first time in the short PMI survey history, Lebanese companies increased their average selling prices in December. The rate of output charge inflation was marginal, however, reflecting a combination of rising input costs and the launch of new improved product lines.

Average purchase costs increased on the back of a stronger euro on currency markets during December. In contrast, average wages and salaries fell slightly for the first time in the series history, Markit said.