Manufacturing activity records marginal gain in August

Sri Lanka’s economic activity in the manufacturing and services sectors improved marginally this August compared to a month ago, although expectations of future activity was high, according to the SL Purchasing Managers’ Index (PMI) maintained by the Central Bank.

The manufacturing sector PMI was 54.4 in August increasing slightly from 54.3 points in July. In August 2016, the manufacturing sector PMI posted 53.5 index points.

A value of over 50 in the index—formed from surveys of large companies in the Western Province—indicates a growth compared to the previous month.

The manufacturing sector increase this August was driven by increased stock purchases despite slow progress in production activities for the month, indicating that buffer stocks are being built to cater to new orders received, and greater expectations of activity for the next three months.

All sub-indices in the manufacturing sector PMI increased, except for employment, which fell, especially due to difficulty finding unskilled labour in the apparel sector.

Meanwhile, the services sector PMI recorded 60.1 index points in August, up from 59.1 index points in July.  The index posted 60.2 index points in August 2016.

Compared to July, this August saw an increase in new business, existing business activities as well as increased expectations of activity for the coming months.

Financial and telecommunication sectors contributed to the expansion in new businesses and business activity through introduction/expansion of technological reach to serve their clients and to improve efficiency of their services.

There was also increased business activity and prices charged in the accommodation, food and beverage sector in August, when the school vacation period increases the demand for domestic tourism services.

Employment increased, albeit at a slower rate while backlogs of work decreased over the month.  Expectations on Labour Cost sub-index continued to decline in August 2017.