Manufacturing and services activities cool down after peak in December

Both manufacturing and services activities in Sri Lanka expanded at a slower rate in January 2018 compared to December 2017, the Sri Lanka Purchasing Managers’ Index (PMI) survey compiled by Central Bank’s Statistics Department showed. 

The manufacturing sector PMI recorded 51.7 index points in January from 59.1 index points in December 2017, after the seasonal peak observed during last two months of that year. 

This was mainly driven by the slowdown in the Production and New Orders sub-indices. Further, the Employment sub-index also slowed down during the month as compared to December 2017 while Stock of Purchases sub-index contracted during the month. 

Meanwhile, the Suppliers’ Delivery Time sub-index lengthened at a slower rate compared to previous month. 

Overall, all the sub-indices of PMI except from stock of purchases sub-index recorded values above the neutral 50.0 threshold signalling an overall expansion in January 2018. Moreover, the expectation for activities indicates an improvement for the next three months.

Meanwhile the services sector PMI recorded 56.6 index points in January 2018 from 61.2 index points in December 2017. This indicates that the Services sector activities expanded in January 2018, albeit at a slower rate, mainly supported by New Businesses, Business Activity, Backlogs of Work and Expectations for Activity sub-indices.

Employment declined in January 2018, partly causing backlogs of work to continue its expansion for the second consecutive month. 

The passive expansion in new businesses and business activity at the beginning of the year could be due to seasonality, since the activity level is compared with a strong activity level in December 2017. 

The increase in Business Activity was mainly observed in Financial Services sector due to expansion of service delivery channels. 

Employment declined due to non-recruitment for vacancies of retired and resigned employees, mainly in financial services, healthcare and real Estate activities sectors. Expected labour cost increased due to routine salary increments in 2018 including collective agreements.