January construction activity exceeds neutral threshold

• Construction PMI records value of 52.9
• Industry outlook for the next three months positive

Sri Lanka’s construction sector for the first time saw its activity exceed the neutral threshold since January 2022. 

According to the Central Bank, this is due to new construction work gradually becoming available, while some suspended projects also recommencing on a limited scale during the month. 

The Purchasing Managers’ Index (PMI) for construction in January 2024 recorded an index value of 52.9, indicating an expansion in activities in the sector that has been struggling for long.

In PMI, a value of 50.0 indicates a neutral level, signifying neither expansion nor contraction, while values above 50 suggest expansion and values below 50 indicate a decline in the respective economic activity.
While, new orders increased in January compared to the previous month, respondents mentioned that, at the moment, the availability of both foreign-funded projects and privately-funded local projects is higher. 

However, employment continued to contract, yet at a slower rate in January. Meanwhile, quantity of purchases rebounded during the month in line with the increases in total activity 
and new orders. 

Nevertheless, increases in material prices were widely highlighted, mainly due to the impact of the amendments made to the Value Added Tax. Suppliers’ Delivery Time remained lengthened 
during the month. 

The industry outlook for the next three months is positive, mainly due to increased project opportunities, the Central Bank said.