Service sector activities reach 24- month high in Dec.

Sri Lanka’s service sector activities reached a 24-month high in December driven by acceleration of activities in peak tourism and festive season while manufacturing activities expanded at a slower pace, according to Central Bank’s SL Purchasing Managers’ Index (PMI).

Manufacturing activities recorded a PMI index value of 54.3, down from 56 index points in November, mainly due to the slower expansion in new orders, production and stock of purchases.

New orders and production expanded at a slower rate during the month owing to the slowdown in the manufacturing of textile and wearing apparel sector.

As potential employees in the manufacturing of wearing apparel sector were attracted to seasonal jobs for better remuneration, a significant slowdown in employment was experienced, which partly impacted the production slowdown.

Meanwhile, services PMI reached a 24-month high to 60.2 index points in December 2019, an increase of 2.8 index points compared to November.

During the month, strong expansion in new businesses and business activity were observed due to the seasonal movement, political stability and measures taken by the government to improve economic activity.

Business activities in wholesale & retail trade and accommodation, food & beverage sub sectors posted a strong growth during the festive season and peak season of tourism. 

The decline in tourist arrivals decelerated to 4.5 percent YoY to 241663 in December last year indicating an almost full recovery of the sector in the aftermath of bloody Easter Sunday attacks. 

The transportation of goods recorded a growth in the month with increased transhipment volumes while other personal services such as leisure activities also improved with the holiday season.

The expectations for activity increased, even though at a slower pace, compared to the previous month. Respondents had cited that they expect a higher growth in their business underpinned by new tax revisions.

Despite the strong growth in business activities, the rate of job creation slowed in many sectors in December 2019 due to the delays in filling vacant positions. 

Further, December was the ninth consecutive month where the index on employment of the services sector continued to remain at threshold level. Backlogs of work sub index also remained unchanged compared to the previous month.