Major expectations drop for manufacturing and services sectors on COVID-19 worries: PMI

Friday, 16 October 2020 03:53 -     - {{hitsCtrl.values.hits}}

  • Expansion seen in Sept. tempered by worries over virus denting 4Q recovery hopes 

Both manufacturing and services sectors expanded in September, the latest Purchasing Managers Index (PMI) issued by the Central Bank showed yesterday, but overall expectations for the fourth quarter declined significantly due to COVID-19 emergence concerns. 

Manufacturing activities expanded at a higher rate in September 2020, compared to August 2020, the report said. 

This expansion in manufacturing PMI was mainly attributable to the increase in production and new orders, especially in manufacturing of food and beverages, and textiles and wearing apparel, sectors. 

“The sub-index of overall expectations for manufacturing activities for the next three months declined significantly due to the prevailing situation of the COVID-19 virus in the country, particularly entering some manufacturing zones.” 

Some respondents in the manufacturing of food and beverages, and textiles and wearing apparel sectors, highlighted that their factories operated at full capacity, receiving more new orders with the normalisation of business activities. 

Further, the employment sub-index increased in line with these developments. Further, the stock of purchases sub-index increased at a slower pace in September. The suppliers’ delivery time sub-index continued to lengthen at a higher pace, due to issues in logistics such as shortage of direct shipping services.

Some respondents highlighted that the restrictions imposed on importation of some categories of goods continued to affect the smooth functioning of manufacturing activities.

The services sector continued to expand for the fourth consecutive month with PMI recording 54.3 in September, compared to the previous month. This was underpinned by the expansions observed in new businesses, business activities and expectations for activity compared to August, indicating a further recovery of services sector activities.

New businesses, particularly in financial services and insurance sub-sectors, improved in September with the gradual normalisation in economic activities. Business activities also expanded in September, yet at a slower pace. The financial services sub-sector was the main contributor to this expansion with increased financial facilities provided to support businesses negatively affected by the pandemic. 

Further, respondents in cargo handling services cited that they were able to handle more transhipments in September. Moreover, business activities related to the insurance and professional services sub-sectors also expanded during the month. 

The employment sub-index almost reached the 50-threshold level in September after a continuous decline in employment for seven months. 

Backlogs of work continued to remain in the negative territory, indicating that any increase in demand can be met with the existing capacity.

Meanwhile, expectations on future business activities increased further in September, with the positive sentiments prevailing on the recovery of economy in the second half of the year. Nevertheless, some respondents expressed concerns on realisation of their expectations due to the re-emergence of the COVID-19 virus in the country.

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