June PMI points to robust growth in both manufacturing and services

The Purchasing Managers’ Indices (PMI) for both manufacturing and services sectors reflected continuing expansion in the activities giving confidence that the economy is on a persistent growth trajectory, further moving itself away from the crisis-struck two years.

The PMI for June showed that manufacturing had recorded an index value of 56.6 compared to 58.2 in May while the services sector logged in an index value of 63.5, from 55.0 in May. The two indices reflected that manufacturing activities are continuing to expand while the services are growing at a faster pace from a month ago.
In PMI, an activity is split between a growth and a decline at an index value of 50.0 while an index at 50.0 indicates a neutral level. The manufacturing sector is largely being helped by the manufacturing of food and beverages as there was a rise in both new orders and production sub-indices. Stock of purchases also has expanded in line with the new orders and production.

The persistent growth in food and beverage manufacturing is a reflection of the improvement in consumer spending on basic food as rise in prices remains contained after two years of runaway inflation.
The inflation for June was at 1.7 percent according to the Colombo Consumer Price Index, much lower than Central Bank’s medium term target of 5.0 percent.

But food prices had risen in June, partly due to the adverse weather.

Despite manufacturing sector doing better, the businesses are circumspect in hiring new staff as the employment sub-index showed a contraction.

“Suppliers’ delivery time further lengthened in June, mainly attributable to the congestion in the major shipping ports,” the statement from Central Bank added.

Further, the respondents are confident over the next three months due to continuous recovery in economic activities.

Meanwhile, the services sector has been driven in June by most sectors. The wholesale and retail trade has grown due to the Haj festival season while the business activities in the transportation, financial services and other personal services had experienced considerable growth.

However, business activities in sectors like accommodation, food and beverages have remained the same due to sluggish tourist arrivals in the off-season.

New business activities have increased in June due to the increases in financial and other personal services.
Employment has improved as the businesses hired new staff to support business expansion.