Manufacturing and services activities recover marginally in June

• Expectations for next three months increased with anticipation that economic activities would normalise in coming months
• Importers experience LC delays; exporters face difficulties in reserving ship space

Sri Lanka’s manufacturing and services activities recovered marginally during the month of June from the adverse impacts of the third wave of the COVID-19 pandemic. 

The manufacturing PMI recorded an index value of 50.4 in June 2021 with an increase of 8.3 index points from the previous month, mainly driven by the strong recovery seen in New Orders. 

All the other sub-indices, except Suppliers’ Delivery Time, edged up from the previous month.

The New Orders, especially in the manufacture of food & beverages sector, increased significantly. 

The Production, Employment, and Stock of Purchases sub-indices, mainly related to the food & beverages sector, which edged up compared to the previous month yet remained below the neutral threshold level, owing to disturbances from the third wave of the pandemic. 

However, the textile & wearing apparel sector indicated deterioration in June, as reflected from the further decline in New Orders, Employment and Stock of Purchases sub-indices.

The Suppliers’ Delivery Time continued to lengthen in June 2021, yet at a slower pace, with the ease of travel restrictions in the domestic front. 

However, many respondents to the survey mentioned that they experienced delays in making overseas payments and in opening letters of credit for import purposes, while those who involved in exports of goods mention that they continuously experience difficulties in reserving shipping space on top of the short supply of empty containers.

Expectations for manufacturing activities for the next three months significantly increased with the anticipation that economic activities would normalise in the coming months supported by the rapid rollout of COVID-19 vaccination across the country, particularly in the Western Province, and the easing of mobility restrictions.

Meanwhile, services PMI returned to growth territory in June 2021, recording an index value of 51.3, after declining for two consecutive months.

This improvement was mainly driven by the increase in expectations for activity supported by the relaxation of travel restrictions.

New businesses sub index improved in June 2021 compared to May 2021, particularly with the improvements observed in education and financial services sub-sectors. 

However, wholesale and retail trade, accommodation, food and beverage and other personal activities sub-sectors saw declines during the month.

Business activities sub index improved in June in line with the relaxation of the travel restrictions towards the latter part of the month. 

Accordingly, insurance, education, professional services and transportation sub-sectors saw improvements during the month. Nevertheless, wholesale and retail trade, other personal activities, accommodation, food and beverage and real estate activities sub-sectors continued to decline with a dip in demand related to discretionary goods and services due to the spread of COVID-19  third wave.

Employment continued to fall, yet at a slower pace in June due to retirements and resignations amid the halt in new recruitments in line with contracted business requirements.

Backlogs of work grew further in June due to disruptions on business operations amid the extension of island wide travel restrictions and localised lockdowns.