Manufacturing and services activities expand in August

• Food & beverage sector leads manufacturing amid ramping up in production
• Manufacturing jobs gain as industrialists recall workers to build scale
• Manufacturers highlight import controls impeding smooth functioning of activities 
• Relatively weak external demand prevents manufacturers reaching pre-pandemic levels  

The Purchasing Managers’ Index (PMI) data for August showed both manufacturing and services activities expanding during the month indicating that the broader economy is maintaining the momentum it gained since May with the easing of restrictions, with a few sectors to spare.  

The PMI for manufacturing activities recorded 57.9 index value for August while the services recorded an index value of 56.0, continuing the expansion for the third consecutive month by the latter, the data compiled by the Central Bank showed.

In July, PMI for manufacturing was recorded at 64.6 index points, indicating some deceleration while the services sector recorded a PMI of 51.4 index points then. 
An index value of 50.0 or above is interpreted as either a neutral level or an expansion in activities. 

Both new orders and production sub-indices powered the manufacturing PMI in August as businesses ramped up production amid pickup in demand as people returned to their normal course of activities, while the manufactures got ready for the upcoming seasonal demand.  

The expansion of manufacturing activities was mainly supported by the manufacturing of food and beverage sector with the focus increasingly shifting towards building food security at home while aiming at export earnings from such produce. 

This was reflected from fairly modest domestic food prices and the increase in export earnings in August and also for the first eight months, which logged 11.45 percent and 0.13 percent increases respectively, from their comparable periods last year. 

Meanwhile, the pickup in domestic tourism sector from June also helped the food and beverage sector. The respondents have cited that they could attract more domestic tourists through promotions, supporting food and beverage and accommodation as a service, helping the business activity sub-index under the services PMI. 

Further, industrialists in the food and beverage sector had recruited new employees with the anticipation of the upcoming seasonal demand. 

This, as well as the overall expansion in the manufacturing sector, has resulted in recalling the staff that was laid off during the pandemic, resulting in a noticeable development in the employment sub-index. 

The suppliers’ delivery time, “continued to lengthen, at a higher pace due to issues in logistics such as unavailability of direct shipping services,” the Central Bank said.

Meanwhile, manufactures had highlighted that import controls on certain categories of goods including machinery parts had adversely affected their smooth functioning of the activities. 
While overall expectation for the manufacturing sector for the next three months improved, some manufacturers remained concerned that the relatively weak demand, particularly from the external front, would prevent them from reaching pre-pandemic levels. 

Meanwhile, in the services sector, new businesses, particularly in the financial services, insurance and transportation sub-sectors, improved in August with the recovery of economic activities. 

The business activities sub-index increased in August for the fourth consecutive month as transport sub-sector improved in line with the increase in apparel and protective masks exports. And so did the accommodation and food & beverage as a service. 

Meanwhile, the backlogs of work in services remained in the negative territory indicating the still remaining slack, while employment declined in the sector owing to non-extension of work agreements of contract employees amid the halt in new recruitments.