New projects shortage hinders Sri Lanka’s construction industry

• Construction industry PMI records index value of 44.4% in June indicating contraction
• Central Bank to release monthly construction PMI survey results from June  onwards
• Survey respondents say market borrowing rate rigidity delays commencement of private-sector construction projects

According to a newly released report on the construction PMI survey, Sri Lanka’s construction industry remained contracted in June 2023 amid the lack of new projects, recording a total activity index value of 44.4.
The Central Bank yesterday said from June onwards the construction PMI survey results will be released to the public every month, similar to the PMI surveys on manufacturing and services.

The Statistics Department of the Central Bank has been conducting the PMI survey for construction activities since June 2017, delivering key industry insights to the Central Bank, assisting the policy formulation process.
According to the June survey, most of the construction sector companies operate at a sub-optimal level amid the limited availability of construction projects. An index value less than 50 indicates a contraction. 
However, several respondents had mentioned that the steady decline in material prices has induced to commence small-scale construction work.
The continued decrease in new orders also reflected the lack of new projects.
The respondents had mentioned that sizable projects were hardly available, except for some foreign-funded projects, and the bidding for available tenders was also highly competitive. 
However, they expect the suspended large-scale projects to gradually recommence later in the year.

Further, employment in the country’s construction sector remained contracted in June, mainly due to the layoffs after project completions. 
Quantity of purchases also declined in line with the decrease in pipeline projects while suppliers’ delivery time remained shortened during the month due to low order quantities. However, the industry outlook remains positive, mainly due to the gradual recovery in the economy, the easing of import restrictions and the expected resumption of the suspended projects. 

Yet the respondents had highlighted that the downward rigidity of market borrowing rates delays the commencement of many private-sector construction projects.