Industrial production recovers in July

Sri Lanka’s industrial production recovered during July, when the country returned to a brief economic normalcy with the ending of the lockdowns on June 20, broadly reflecting the sensitivity of the country’s industrial activities to the travel and other restrictions forced to be imposed time to time in response to the resurgence in the virus. 

According to the Index of Industrial Production (IIP), the key gauge of the country’s manufacturing heft, recorded 109.7 index points in July 2021, from 97.2 index points in June, when the country was under lockdown for three weeks in that month.

The IIP drew closely in line with the manufacturing Purchasing Managers’ Index (PMI) for the same month, which also demonstrated an acceleration in the activity in July, with an index value of 57.8, from 50.4 in June. 

The IIP is relatively more detailed than the PMI and provides performance on each key industrial activity at a more granular level. The PMI data for August is due this week.

July IIP also drew parallel with the merchandise exports data for the same month, which reflected a steady recovery through July.  

Sri Lanka’s IIP reached an index value of 119.6 in March, the highest in recent times, before the settling at 90s levels until June, due to the restrictions came about with the resurgence in the virus since April 2021. 

July IIP is however marked a 1.4 index points slippage, from the 111.3 recorded in the same month in 2020, when the economy was rebounding fast from the two-month long lockdowns imposed when the pandemic first struck the country. 

The key industrial sectors, which had a bearing on the July index value over the same period last year, were the manufacturing of food products, beverages, wearing apparels and chemical and chemical products, which all fell from the year earlier period levels. 

Among the key industrial sectors, which recorded an expansion between the two periods, were manufacturing of textiles, rubber and plastic products and other non-metallic mineral products. 

Resilience and sustained increase in the industrial production remain utmost important to keep the earnings from the merchandise exports continuously at elevated levels to minimise further pressure on the foreign liquidity in the domestic market when other inflows have come under strain due to the pandemic.