Manufacturing and services show resilience in August, potential for expansion

Monday, 18 September 2023 04:11 -     - {{hitsCtrl.values.hits}}

  • Manufacturing PMI index value at 49.3 nears neutral threshold
  • Positive trends in new orders and suppliers’ delivery time
  • Stagnation in production and employment persists 
  • Services sector maintains growth momentum, index value reaches 57.6
  • Tourism and domestic demand drive business activities
  • Steady employment levels, backlogs of work
  • Outlook points to positive trends

The country’s manufacturing and services sectors show signs of resilience and potential for further expansion in the coming months according to the Purchasing Managers’ Index (PMI) in August compiled by the Central Bank.

It said that the overall data from August 2023 paints an optimistic picture for the Sri Lankan economy, as both the manufacturing and services sectors show signs of resilience and potential for further expansion in the coming months.

Manufacturing PMI reached 49.3 in August 2023, signalling a notable uptick in manufacturing activities compared to previous months. The surge, reported by the Central Bank, is inching closer to the neutral threshold, indicating a potential rebound in the sector.

Among the key sub-indices, New Orders and Suppliers’ Delivery Time experienced positive growth during the month. Importantly, the food and beverages sector spearheaded the surge in New Orders, attributing it to downward revisions in retail prices. Respondents from this sector reported an overall upswing in their business activities. However, the textile and wearing apparel sector faced headwinds due to subdued global demand, leading to a setback in Production.

Although New Orders showed promise, Production and Employment continued to face contraction in August. The textile and apparel sector was the primary driver behind the production slump, highlighting the persistent global demand challenges. Meanwhile, Employment remained in contraction mode.

The Services sector PMI reported an index value of 57.6 in August 2023, affirming a sustained expansion in services activities.

The Central Bank said significant increases were observed in New Businesses, Business Activities and Expectations for Activity. Financial services, wholesale and retail trade, other personal activities, professional services and education sub-sectors led the surge in new business activities.

It added that the Business Activities exhibited positive developments across several sub-sectors, with accommodation, food and beverage, and other personal activities sub-sectors showing substantial growth. This was largely attributed to high tourist arrivals and a boost in domestic tourism. Additionally, the financial services sub-sector saw improvements due to increased credit demand in the backdrop of low market interest rates.

Employment remained steady, maintaining the previous month’s gains. Meanwhile, Backlogs of Work decreased at a slower pace during August, indicating a stabilising trend in the services sector.

The Central Bank said expectations for both manufacturing and services activities over the next three months appear promising. Factors such as relaxed import restrictions, lower borrowing rates and reduced raw material prices are anticipated to drive growth in these sectors.