May manufacturing activities expand; services show upturn

Sri Lanka’s manufacturing sector expanded in May following the seasonal contraction observed in April, while the services sector also showed a strong upturn. 
According to the Sri Lanka Purchasing Managers’ Index (PMI), compiled by the Central Bank, the manufacturing sector PMI recorded an index value of 60.6 in May, with an increase of 15.1 points from April.

“The recovery of PMI was largely attributable to the significant increase in production to cater both the new orders received during the month and the uncompleted orders received in April due to the New Year holidays, especially in the manufacturing of textiles, wearing apparel, leather and other related products.

New orders, stock of purchases and employment sub-indices also increased during the month. However, the employment sub-index in manufacturing of textiles, wearing apparel, leather and other related products still remains in the negative territory,” the Central Bank said. 

Meanwhile, the suppliers’ delivery time sub-index marginally lengthened due to the adverse weather conditions prevailed in the latter part of the month. 
Overall, all the sub-indices of the PMI recorded values above the neutral 50.0 threshold in May 2018 signalling an overall expansion in manufacturing activities during the month. 

The Central Bank said the expectation for activities indicates an improvement for the next three months.  

Meanwhile, the services sector PMI recorded 56.9 index points in May 2018, from 53.2 index points in April 2018. 

“The services sector experienced a strong upturn in May following subdued activity levels seen in April and was mainly supported by the faster growth in new businesses, business activity and employment. 

The rise in new businesses and business activities was mainly observed in financial services, telecommunication and transportation of goods and warehousing sectors,” the Central Bank said. 

Respondents had cited expansion of service delivery channels and technology-based improvements as contributory factors to this growth.  

Employment in the services sector recovered in May 2018 in contrast to the decline observed during the previous month, due to accelerated pace of recruitments. 
Meanwhile, service providers’ optimism on the three-month Business Outlook also strengthened at a modest pace while backlogs of work continued to decline in May 2018. 

Prices charged by the service providers increased owing to upward revisions to transport charges and recent revisions to the tax structure. The expected labour cost in the services sector also increased due to the expected salary increments for the year 2018.