Manufacturing and Services increase in Oct.

All the sub-indices of Purchasing Managers Index (PMI) Manufacturing recorded values above the neutral 50.0 threshold, signalling an overall expansion in October compared to September, the Central Bank said in a statement.  

The improvement observed in Manufacturing activities in October was mainly driven by the improvement in New Orders and Production, especially in Manufacturing of Food and Beverages activities, led by the positive outlook with the seasonal demand. Even though the employment in the Manufacturing of Food and Beverages activities has improved with seasonal trend, overall employment slowed down. 

This was mainly evident in Manufacturing of Textiles, Wearing Apparels, Leather and Related Activities due to difficulties to find employees in the market. Meanwhile, Stock of Purchases indicates an expansion with the stock holding in manufacturing of furniture activities in preparation for the upcoming season. 

Lengthening of suppliers’ delivery time usually indicates that economy is booming with expanding activities in the short run. However, in this instance, suppliers’ delivery time lengthened at the same rate observed in the previous month, which is mainly driven by scarcity of raw materials and the increase of the lead-time purposely with the expectation of rupee stabilisation thereby controlling further increase in raw material prices.

The Services sector expanded at a higher pace in October, underpinned by a strong upturn in Business Activities, Expectations for Activity and New Businesses. The expansion in Business Activities was seen mainly across financial services and transportation and warehousing sub sectors. 

However, respondents cited that the depreciation of the local currency had an adverse impact on import volumes and thereby on their activity growth. New Businesses also expanded across financial services and professional services sub sectors. Employment levels expanded at a higher rate in October owing to the expansion in Business Activities. 

Service providers’ optimism on the three months’ business outlook strengthened in October 2018 due to the upcoming festive season and the peak season for tourism. However, respondents raised concerns over the current political situation and the weakening of the domestic currency which could moderate the realisation of expectations. 

Prices Charged of the Services sector increased at a higher rate while the expected Labour Cost in the services sector also increased during October due to bonus payments.