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Slow growth for manufacturing, services in February

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The country’s manufacturing and Services sector experienced slow growth in February as per the Sri Lanka Purchasing Managers’ Index (PMI) compiled by the Central Bank.

It said manufacturing activities increased at a slower rate in February compared to January, mainly driven by the decrease in new orders and production, especially in manufacturing of textiles, wearing apparels, leather and related activities. This decline was mainly due to the fewer number of working days in February. Stock of purchases also decreased during the month in line with the decrease in new orders and production.

However, a slight improvement in employment was experienced with the recruitment of new employees to enhance business activities for upcoming seasonal demand. Meanwhile, suppliers’ delivery time lengthened at a slower rate. Logistical issues experienced at the beginning of February and supply disruptions due to the Chinese New Year holiday season have lengthened the suppliers’ delivery time. All sub-indices, apart from new orders and production, recorded values above the neutral 50 threshold.

The Central Bank also said the Services sector expanded in February, albeit at a slower rate, underpinned by slower expansion in New Businesses, Business Activity, Employment and Expectations for Activities compared to January. 

This slowdown was observed after witnessing continuous acceleration in the Services sector expansion for two consecutive months. The expansion in Business Activities was mainly seen across financial services and transportation sub sectors due to technology-based improvements and expansion in export volumes. Both New Businesses and Expectations for Activities slowed down due to many people taking a wait-and-see approach as there is an uncertainty in the business climate. Further, expectations in the wholesale and retail trade subsector deteriorated due to new vehicle duty reforms introduced in the Budget 2019. Some respondents cited that growth of Employment may decline since they are focusing on business processes automation and adoption of artificial intelligence.

Prices Charged in the Services sector increased at a slower rate in February while the expected Labour Cost in the Services sector also increased at a slower pace.

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