Local construction activities hover around neutral territory in December 2023

•  Industry recorded a total activity index value of 48.6
•  Slower contraction in construction activities compared to November
•  Sector heavily reliant on foreign-funded projects
•  Grim industry outlook for next three months due to tax revisions, lack of projects

Sri Lanka’s construction sector in December moved closer towards neutrality, showing a slower contraction in activities when compared with the previous month. 
According to the Construction Purchasing Managers’ Index (PMI), compiled by the Central Bank every month, the industry recorded a total activity index value of 48.6 in December 2023. 

In the 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 the limited availability of project work continued to hamper the activity levels, new orders declined in December, 
broadly at a similar pace compared to the previous month. 

In the 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 the limited availability of project work continued to  hamper the activity levels, new orders declined in December,  broadly at a similar pace compared to the previous month.  Many respondents mentioned that currently they are heavily  relying on foreign-funded projects.  Employment continued to contract, mainly due to the  layoffs, in line with the project completions. Further, the  Quantity of Purchases remained contracted during the  month, since the ongoing work and upcoming projects  continued to decline.  In the meantime, the Suppliers’ Delivery Time remained  lengthened in December.  With the lack of upcoming projects and impact of tax  revisions on price levels, the industry outlook for the next three  months is on the downside.