March Purchasing Managers’ Index gets festive boost and sends signals of an economic rebound

Despite the hardships, Sri Lankans celebrated Avurudu this year with the hope that things would turn better, as the country’s economy appears to be on the path towards recovery 
PIC BY NISAL BADUGE

• Manufacturing PMI records index value of 51.4; services 55.1
• Expectations for next three months improve amid positive developments in economy 

The Purchasing Managers’ Index (PMI) turned positive in March, after a months-long contraction, particularly in the case of manufacturing, due to both the festive demand and the signs of an end to the economic contraction, which set off last year. 

The manufacturing PMI returned to a positive index value of 51.4 in March, after nine months of contraction, as new orders and productions rose for mainly food and beverages, ahead of the New Year season. 

In February, the PMI recorded an index value of 42.3. An index value of 50.0 splits an activity between expansion and growth. The PMI remains one of the most-watched gauges of economic activity, which particularly provides clues to the economy’s future direction. 

“Expectations for manufacturing activities for the next three months indicated an improvement with the developments observed in the current economic environment,” a statement from the Central Bank said. 
Meanwhile, the services PMI too returned to 55.1 index points in March, after briefly falling into a contraction in February, with 48.7 index points. 

The financial services, insurance and professional services sub-sectors drove the March services PMI.

“Accordingly, the financial services sub-sector continued to improve with the increases in deposits, while the other personal activities sub-sector also exhibited a significant improvement,” the Central Bank said. 

“However, business activities related to the wholesale and retail trade sub-sector continued to deteriorate, despite some improvements seen ahead of the festive season,” it added. 

Some respondents nevertheless raised concerns about the higher electricity tariffs and the tax rates, which bode negatively on their bottom lines.