Manufacturing, service activities slow for second consecutive month

• Feb. manufacturing, service activities down
• Future expectations record significant decline 

Sri Lanka’s manufacturing and service sector activities slowed down for the second consecutive month in February while the expectations for the near future also recorded a significant decrease due to the coronavirus (COVID-19) outbreak, according to the Central Bank (CB). 

The growth in the Manufacturing Managers’ Index (PMI) slowed down to 53.6 index points in February, compared to 50.6 index points in February, last year, while recording a  decrease of 0.4 index points, compared to January 2020.

The CB stated that the slowdown is mainly due to the slower expansion in new orders and employment, in particular in the apparel sector, while the expectations for the next three months decreased significantly, due to the COVID-19 outbreak.

“New orders and employment slowed down, particularly in the manufacturing of textile and wearing apparel sector, with the decrease in global demand. Moreover, many respondents in the textile and wearing apparel sector highlighted that their raw material imports have been delayed due to the supply-side issues that arose from the COVID-19 outbreak.  

Accordingly, the suppliers’ delivery time lengthened further during the month of February, due to the delays in shipments in response to the COVID-19 outbreak, thereby causing an increase in the overall index,” the CB noted.

 The services sector activities also significantly slowed down in February 2020, compared to January 2020, underpinned by the slower expansion observed in new businesses, business activity and expectations for activity, due to the impact of the COVID-19 outbreak.

The Services PMI recorded a decline of 6.8 index points, compared to January 2020 and a decline of 2.8 index points, compared to February last year, reaching 50.2 index points. 

In particular, business activities in accommodation, food and beverage and transportation sub-sectors, declined due to the impact of the COVID-19 outbreak, as there has been a decline in the arrival of tourists and shipments from China in February 2020.

Further, financial services and professional services sub-sectors also recorded a decline, compared to January. 

Similarly, expansion in new businesses also declined, compared to the previous month, across most of the sub-sectors, with the most notable decline being recorded in the transportation and other personal services sub-sectors.

Consequently, overall business activity in the services sector expanded at a slower pace in February 2020.

The CB noted that expectations for activity eased significantly in February 2020, mainly in accommodation, food and beverage and transportation sub-sectors, over the distress on the possible impact of the COVID-19 outbreak.

“Further, the respondents engaged in wholesale and retail trade activities, particularly in international trade and financial services activities, also cited that they expect a decline in business activities in the next few months,” the CB stated. 

The slowdown in business activity and expectations for activity also steered towards the decline in employment, which consequently leading towards a slower decline in backlogs of work in February.