Manufacturing, services see strong growth in October

• Manufacturing PMI reaches 7-month high 
• Strongest rate of growth in services PMI since March

The country’s manufacturing and services sector saw strong growth as per Purchasing Managers’ Index (PMI) in October in comparison with September. 

“Indicating a strong revival in manufacturing activities in the country, the manufacturing PMI reached a seven-month high at 60.4 in October with an increase of 6.1 index points compared to the previous month,” Central Bank said. 

It said this increase in manufacturing PMI was attributable to the increases observed in all the sub-indices. Significant increases were observed in New Orders and Production, particularly in the manufacture of food and beverages and textiles and apparel sectors during the month. 

Many respondents from the manufacture of Food and Beverages Sector mentioned that they secured more local orders in October, targeting demand in the upcoming festive season, while textile and apparel manufacturers have received healthy export orders. 

CBSL said employment also increased during the month compared to the previous month with the relaxation of travel restrictions in the country. However, some respondents in the textile and wearing apparel sector highlighted that their production levels could be even higher if sufficient employees were available.

The Stock of Purchases increased with the improvement in New Orders and anticipation of the normalisation of economic activities. Some respondents in the manufacture of food & beverages sector highlighted that they increased purchases, in account of supply-side concerns. Meanwhile, Suppliers' Delivery Time lengthened at a higher rate in October. 

The continuous increase in the cost of imported raw materials, mainly due to rising global commodity prices, has been highlighted as a major concern by most of the respondents in all sub-sectors. In the next three months, expectations for manufacturing activities remain at higher levels anticipating further improvements in economic condition locally and globally.

CBSL said the Services PMI increased to 57.9 in October underpinned by the increases in New Businesses, Business Activities and Expectations for Activity sub-indices. 

“This is the strongest rate of growth in services PMI, which was observed since March,” CBSL added.

It said New Businesses increased in October compared to the previous month mainly with the improvements observed in financial services, transportation, education, insurance, professional services, real estate and telecommunication sub-sectors. Business Activities sub-index saw a sharp increase in October with the improvements observed across almost all the sub-sectors. 

Accordingly, significant improvements were observed in business activities related to financial services, other personal activities, transportation, education and wholesale and retail trade sub-sectors. 

Nevertheless, some respondents were pessimistic over the negative consequences on their business activities from increasing input costs, and supply constraints and delays amidst import related issues. Further, respondents in freight forwarding companies also expressed their concerns over the adverse impact on export volumes due to capacity limitations and increasing freight charges. 

Employment sub-index continued to remain in the negative territory with retirements and voluntary resignations exceeding the number of new recruitments. Meanwhile, Backlogs of Work decreased in October for the first time since March as a majority of staff reported to work after the relaxation of travel restrictions.

Expectations for Business Activities for the next three months increased in October following the relaxation of pandemic related restrictions and favourable expectations on demand side developments in the upcoming festive season.