Manufacturing and services rebound in May: PMI

• Improvement seen after historic slump in April 
• Overall expectations for next three months improve but COVID-19 worries remain
• New orders, stock of purchases and employment improves but still below neutral level

Manufacturing and service sectors rebounded in May after hitting a historic low in April as curfew was gradually rolled back and supply chains recovered, the Central Bank said in its latest Purchasing Managers Index (PMI) yesterday and prospects improved for the next three months.  

Manufacturing sector PMI recorded a noticeable bounce in May 2020 reaching to 49.3, which is an increase of 25.1 index points, from the all-time low of 24.2 recorded in April 2020. The gradual easing of restrictions for mobility has contributed to the resumption of economic activities in the manufacturing sector. Production sub-index reported an index value of 51.1 in May 2020 compared to 3.5 reported in April, reflecting a significant expansion in volume produced, particularly in manufacturing of food, beverages and manufacturing of textiles, wearing apparels sectors. 

Further, New Orders, Stock of Purchases, Employment sub-indices also improved during the month of May 2020, yet remained below the neutral level. Meanwhile, Suppliers’ Delivery Time lengthened at a slower pace during the period signalling a softening of stress on supply chain.

Many respondents in the manufacturing of textile and wearing apparel and manufacturing of chemicals and chemical products sector highlighted that they still have not received orders for their products and therefore, they have initiated to produce some alternative products relating to health and safety instead of their regular products. 

The overall expectations for manufacturing activities for the next three months significantly increased compared to the previous month, yet the manufacturers are still concerned that COVID-19 pandemic would continue to affect the consumer demand. 

Services sector PMI rebounded significantly to 43.1 in May 2020 from a record-low of 29.8 in April 2020, with the steps taken towards resumption of civilian life and institutions back to normalcy in the country following the curb in the spread of COVID-19 pandemic. This increase was underpinned by increases observed in New Businesses, Business Activities and Expectations for Activity sub-indices.

New Businesses sub index increased in May 2020 owing to improvements in new businesses in transportation and wholesale and retail trade sub-sectors with the lift of domestic travel restrictions, which had been imposed to control the spread of COVID-19 pandemic.

Business Activities sub index also increased significantly during the month indicating a moderation in contraction of Service activities. Business activities of transportation, wholesale and retail trade, professional services and telecommunication sub-sectors showed an improvement over the previous month with the normalisation of business activities. However, business activities related to tourism industry including accommodation, food and beverage sub sector declined owing to restrictions imposed on hotel operations and zero international tourist arrivals for the second consecutive month.

Further, respondents in Services sector are optimistic on future business activities with the expected revival of economic activities aftermath of COVID-19 pandemic.

However, Employment declined in May 2020 compared to previous month due to halt of new recruitments amidst retirements. 

Meanwhile, Backlogs of Work continued to increase, softening the overall index, for the third consecutive month, primarily due to the lingering effect of COVID-19 pandemic.