February industrial production slips; but apparel and textiles continue to add gain

Industrial production, which primarily measures the manufacturing heft of local factories, slipped in February from the levels seen in January, but apparel and textiles manufacturing made stronger gains continuing the momentum set forth this year. 

The latest Industrial Production (IIP) Index, a key gauge of the industrial firepower of the country, recorded 98.0 index points in February compared to 108.3 index points in January this year. The IIP in the same month last year was 104.2. 

Despite the slippage in the overall index, a more granular level look into how key manufacturing sectors had performed during the month showed some notable improvements in the areas of textiles and wearing apparel, re-kindling hope for better months ahead for the sector, which suffered immensely from the pandemic-induced conditions. 

Manufacturing of textiles made the highest gain of any sector in the month, climbing 39.4 percent year-on-year to 114.3 index points in February. 

Meanwhile, the manufacturing of wearing apparels added 0.8 percent gains from a year ago to record 102.1 index points in the month. 

The solid gains in the two sectors is an indication that the broader apparel and textiles sector, which makes the country’s largest merchandise export basket, is well on its way to its pre-pandemic days of sales and earnings as key customers in the West are gradually returning to normalcy, leaving the pandemic days behind. 

 
Another notable catalyst for the broader garment sector to make sizeable gains in February was the New Year festival season, which sparked a fresh wave of sales in the domestic markets as people flocked to streets and fashion retailers after more than a year in sheltering-in-place. 

Meanwhile, the food manufacturing segment shed 7.6 percent in February to 97.4 index points but the beverage segment added 8.6 percent to make 115.3 index points from the year earlier levels. Further, the tobacco products also added 20.3 percent to the index in February to end with 80.4 index points. 

The other manufacturing segments, which made notable gains in February, were pharmaceutical products, paper and paper products, printing and reproduction of recorded media, furniture and manufacture of machinery and equipment. 

Meanwhile, the segments which made declines in February from a year ago were wood and products of wood and cork, coal and refined petroleum, chemical and chemical products, rubber and plastic products, fabricated metal products, electrical equipment and categories clubbed together under other manufacturing. 

Sri Lanka’s current economic policy is largely premised on re-building a domestic production economy, which has received tremendous support from funding at very low interest rates and extremely low taxes.