August industrial production rebounds from July but remains well below last year’s

The Index of Industrial Production (IIP), which measures the country’s industrial sector heft staged a recovery from July to August, but the index remains well below last year’s levels as the economy is in a deep recession. 
The index compiled by the Department of the Census and Statistics reported a value of 90.5 index points for August, down 14.3 percent from a year ago on contractions seen in the manufacturing of food products, textiles, paper and paper products, coke and refined petroleum products, furniture, basic metals, electrical equipment and non-metallic mineral products.

However, the other big sectors like manufacturing of beverages and wearing apparels logged expansions from the previous year’s levels, predominantly on their export orientation. 
The index hit an all-time low for the year in July when the reading came in at 85.6 index points when the country was going through acute fuel shortages and hours-long power cuts amid massive political and social upheaval resulting in the ouster of the former President Gotabaya Rajapaksa.  

On a monthly basis, the IIP slipped 1.3 percent reflecting the continued decline in the country’s industrial sector through the third quarter which ended roughly two weeks ago, after the economy contracted 8.4 percent in the second quarter.
The monthly IIP is measured using the difference between the 12 month moving average index values separately taken through July and August which smoothen out the seasonal variations for higher accuracy of the monthly movements in the industrial activity in the country.

Hence, the August contraction in industrial activities provides a preview of the continuous decline in the economy through the second half of the year, bringing the full year contraction to around an estimated 9.0 percent, the deepest Sri Lanka would end up recording for any year. 
The dollar shortage and the bone-crushingly tight monetary and fiscal policies put in place to arrest runaway prices have been having a major pull back on almost all economic activities since the second quarter this year.

While export-oriented manufactures are somewhat insulated from the ongoing troubles, other businesses are faced with numerous challenges spanning from defending their margins amid soaring cost inflation to falling sales caused by demand destruction policies such as higher rates and taxes to the problems they face in their supply chains.