Manufacturing sector expands, service sector recovers in June

Wednesday, 17 July 2019

According to the Sri Lanka Purchasing Managers’ Index (PMI) released by the Statistics Department of Central Bank on Monday, the industrial production in Sri Lanka expanded in June 2019 while services sector recovered after the April 21 terrorist attacks. Manufacturing activities expanded at a higher rate in June 2019, recording an index value of 53.9 which is an increase of 3.2 index points, compared to May 2019.

This expansion in manufacturing PMI was mainly attributed to the significant recovery in Employment, especially, in manufacturing of food & beverages and textiles & wearing apparels sectors, from the lower employment availability experienced after the Easter Sunday attacks.Expansion in New Orders and Production, particularly in manufacturing of food and beverages sector, also contributed to the improvement of PMI in June 2019.

Many respondents also highlighted that New Orders and Production recovered to a greater extent in June with the normalization of economic activities after the disruptions caused by the Easter Sunday attacks.The Stock of Purchases increased considerably with the expansion of New Orders and Production. Further, Suppliers’ Delivery Time lengthened at a slower rate as a combined outcome of increased demand for supplies of input and the gradual easing of the tight security measures deployed.

All sub-indices of PMI Manufacturing exceeded the neutral 50.0 threshold signaling an overall expansion in manufacturing activities during the period under review.Services sector recovered in June 2019 from its lowest level recorded in May 2019, which was mainly caused by the Easter Sunday attack to record an index value of 53.1 increasing 8.4 index points.

The recovery in Services activities is mainly attributable to expansion in New Businesses and Business Activity, and Expectations for Activity.New Business activities of Wholesale and retail trade, and Transportation sub sectors, which deteriorated after the Easter Sunday attack, expanded in June 2019.

Further, respondents in accommodation, food & beverage, and other personal services sub sectors, which largely depended on tourist arrivals in the country highlighted that Business Activities were gradually picking up.

Expectations for Activity were also increased in June 2019 after declining for two consecutive months. However, Employment recorded a deterioration compared to previous month, yet at a slower pace, due to delays in filling vacant positions.

Prices Charged in the Services sector declined in June 2019 due to price discounts offered by hotels and price reductions offered by firms in Transportation sub sector to face the competitiveness in the industry.Meanwhile, Expected Labor Cost for next three months increased at a slower pace in June 2019