Positive start for manufacturing and services PMI

• New biz prospects improve for hard-hit services
• Vaccine hopes improve expectations for future growth

Starting the year on a positive note, both Manufacturing and Services sectors improved with an uptick in new orders and improved prospects for future business, the Purchasing Managers Index (PMI) for January showed yesterday.  

Manufacturing PMI remained expanded in January recording an index value of 60.2 owing to the expansion in New Orders and Production, the Central Bank said in a statement. The increase of Stock of Purchases sub-index also contributed to the overall expansion of the PMI.

New Orders and Production sub-indices remained at healthy levels especially in manufacture of Food and Beverages sector following the festival season. However, some respondents in this sector highlighted that lower than expected demand due to the COVID-19 situation affected business activities.

Employment expanded at a higher rate during this period with new recruitments. However, some manufacturers highlighted that they had struggled to complete their production on time due to the lack of employee availability, mainly due to pandemic-related health concerns. 

Although New Orders and Production expanded at a slower pace, Stock of Purchases expanded at a higher rate due to the depletion of stocks previously held and the intended accumulation of stocks for future requirements, anticipating supply disruptions, due to the upcoming Chinese New Year holidays. Further, the Suppliers’ Delivery Time sub-index lengthened at a higher pace during the month. 

Many respondents mentioned that their shipments were delayed due to issues related to port/shipping.

Expectations for manufacturing activities in the next three months improved further with an expected normalisation of economic activities within the country as well as in major export markets.

The Services sector PMI recorded a value of 56.2 in January. This indicates a further recovery in the Services sector, which was affected by the second wave of COVID-19. This increase was underpinned by expansions observed in new businesses, business activities and expectations for activity.

New businesses increased in January, particularly with improvements observed in Financial Services, Transportation, and Wholesale and Retail Trade sub-sectors.

Business activities in the Services sector increased in January for the second consecutive month. Goods and Passenger Transportation sub-sector recorded an improvement during the month with people adapting to the new normal. Business activities in Accommodation, Food and Beverage sub-sector improved further with the gradual recovery in domestic tourism owing to promotional discounts offered during the period. 

Moreover, Financial Services, Education and other personal services sub-sectors also experienced an increase in business activities in January.

However, respondents in import trade continuously cited their concerns over restrictions on non-essential imports. Employment declined in January due to the non-extension of work agreements of contracted employees and retirements, amidst delays in new recruitments.

Backlogs of work increased in January due to the disruption to business activities caused by COVID-19 related health concerns.

Expectations on future business activities increased further in January due to increased optimism on the recovery of economic activities affected by the second wave, with people adapting to the new normal.