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Wednesday, 18 March 2020 01:09 - - {{hitsCtrl.values.hits}}
The Manufacturing and Services sectors grew at a slower pace in February as against January, according to the Sri Lanka Purchasing Managers’ Index (PMI).
The Central Bank said Manufacturing PMI increased at a slower rate in February 2020, recording an index value of 53.6, mainly due to the slower expansion in New Orders and Employment, while expectations for the next three months decreased significantly due to the COVID-19 outbreak.
New Orders and Employment slowed down, particularly in manufacturing in the Textile and Wearing Apparel sector with the decrease in global demand.
Moreover, many respondents in the Textile and Wearing Apparel sector highlighted that their raw material imports had been delayed due to supply side issues that arose from the COVID-19 outbreak. Accordingly, Suppliers’ Delivery Time lengthened further during February due to delays in shipments in response to the COVID-19 outbreak, thereby causing an increase in the overall index.
Meanwhile, a marginal increase in Production and Stock of Purchases in the Food and Beverages sector could be observed in preparation to meet upcoming seasonal demand. All sub-indices of Manufacturing PMI except Employment exceeded the threshold of 50.0 (neutral), signalling an overall expansion, yet at a slower rate, in manufacturing activities during February 2020.
The manufacturers, especially those linked to the Apparel sector, cautioned that the COVID-19 outbreak would disrupt the global supply chain. As a result, overall expectations for manufacturing activities for the next three months deteriorated significantly compared to the previous month.
The Central Bank, quoting Markit, a leading global diversified provider of financial information services, said Global Manufacturing PMI recorded a value of 47.2 in February 2020 with a decrease of 3.2 index points from January 2020, which is the steepest contraction in over a decade as the COVID-19 outbreak hit supply chains and demand. The Manufacturing PMI of China contracted and that of the US and India slowed down in February 2020 while the UK’s improved. Russia and Eurozone PMIs remained in negative territory.
Services sector expansion slowed down in February 2020 compared to January 2020, underpinned by the slower expansion observed in New Businesses, Business Activity and Expectations for Activity due to the impact of COVID-19 outbreak. Business Activities in the Accommodation, Food and Beverage and Transportation sub-sectors declined due to the impact of the COVID-19 outbreak as there has been a decline in tourist arrivals and shipments from China in February 2020.
Furthermore, the Financial Services and Professional Services sub-sectors also recorded a decline compared to the previous month. As a result, overall Business Activity in the Services sector expanded at a slower pace in February 2020. Meanwhile, expansion in New Businesses also declined compared to the previous month across most of the sub-sectors and the decline was notable in the Transportation and Other Personal Services sub-sectors. Expectations for Activity eased significantly in February 2020, mainly in the Accommodation, Food and Beverage and Transportation sub-sectors over distress on the possible impact of the COVID-19 outbreak.
Furthermore, respondents engaged in wholesale and retail trade activities, particularly in international trade and financial services activities, also cited that they expected a decline in business activities over the next few months. Meanwhile, the ease in Business Activity and Expectations for Activity steered towards the decline in Employment, which consequently led towards a slower decline in Backlogs of Work in February 2020.
The Central Bank said that according to Markit, Global Services PMI declined to 47.1 in February 2020 from 52.7 in January 2020, recording the lowest reading in almost 11 years due to the impact of the COVID-19 outbreak.
The decline was led by a contraction in China, alongside lower levels of output in the US, Japan and Australia. However, Services PMIs of the UK and India indicated that their Services sectors improved in February 2020 compared to the previous month.
