January Purchasing Managers’ Index gains reflecting continued economic recovery

• While outlook remains positive, respondents continue to confront challenges pertaining to imports and inflation 

The Purchasing Managers’ Index (PMI) for January continued to expand amid the absence of virus-related restrictions and optimism but the respondents in both manufacturing and services sectors cited persistent challenges pertaining to imports and mounting inflationary pressures. 
The manufacturing sector PMI recorded 58.7 index points in January, logging an increase of 0.6 index points from December 2021, reflecting an acceleration in the expansion of the activities. 
The services sector PMI recorded an index value of 57.5, reflecting a decrease of 4.9 index points from the month before but still reflecting a healthy expansion in activity levels. 
The PMI is a crucial and a widely watched indicator to measure the health of an economy and a reading of 50 or above indicates an expansion of activities. 
The manufacturing sector received a boost from New Orders, Production and Employment. Meanwhile, Stock of Purchases increased while the suppliers’ delivery time lengthened on a month-on-month basis. 
“The expansion in New Orders, Production and Stock of Purchases, particularly in the manufacture of textile and wearing apparel and food and beverage sectors, has mainly contributed to the improvement in the PMI,” the Central Bank said. 
While the Employment sub-index reflected an expansion, indicating continued returning of workers to their jobs, the Employment sub-index in the textile and wearing apparel sector had continued to decline, reflecting difficulties in attracting employees to the sector. 
Wearing apparel is among a slew of other industries hamstrung by labour shortages and remains one of the top impediments for business and investments in Sri Lanka, which requires immediate attention by the policymakers.
As a result, Sri Lanka continues to miss opportunity to attract top dollars by way of direct investments and large local companies are also setting up shop in Asia and Africa, where access to labour is relatively easy.
Critical educational reforms, popularisation of vocational education and serious attitudinal change are crucial in building skills for tomorrow’s global needs or else the country will be left behind and the people would remain impoverished.   
Meanwhile, the service sector PMI was boosted by the increases in the New Businesses, Business Activities, Employment and Expectations for Activity sub-indices. 
“Amid the continuation of relaxed pandemic-related restrictions, Business Activities indicated a softer growth in January 2022 compared to December 2021,” the Central Bank said. 

“Accordingly, the transportation and professional services sub-sectors reported significant improvements during the month. In addition, business activities in the accommodation, food and beverage sub-sector recorded further developments, supported by the increase in tourist arrivals,” it added.
Although the expectations for business activities improved further for the next three months under both manufacturing and services sectors, the respondents said they continue to face difficulties when importing raw materials, due to the delays, partly due to the impediments in clearing of shipping documents, opening letters of credit and congestion at the port. 
Rising inflationary pressures have also spooked many of the service sector businesses.