Sri Lanka's services sector offers the biggest support to economic activity



Manufacturing PMI expanded at a slower pace in December 2019 recording an index value of 54.3 mainly due to the slower expansion in New Orders, Production and Stock of Purchases.


Meanwhile, Services PMI reached a 24-month high to 60.2 index points in December 2019, supported by the strong expansion in New Businesses and Business Activity in December 2019 due to the seasonal movement, political stability and measures taken by the government to improve economic activity.


All the sub-indices indicated an expansion, yet at a slower pace, compared to November 2019.


New Orders and Production expanded at a slower rate owing to the slowdown in manufacturing of textile and wearing apparel sector.


A significant slowdown in employment was experienced, particularly in manufacturing of wearing apparel sector as potential employees were attracted to seasonal jobs for better remuneration. This slowdown in employment partly impacted the slowdown in production.


Although the New Orders and Production expanded at a slower pace, the Stock of purchases expanded at a higher rate due to intended accumulation of stocks in December 2019 to fulfil the future requirements, anticipating supply disruptions, due to upcoming Chinese new year holidays. Further, Suppliers' Delivery Time remained at the neutral level indicating that it remains as same as in the previous month.


All sub-indices of PMI Manufacturing, except Suppliers’ Delivery Time which was on neutral level, exceeded the threshold of 50.0 (neutral) signalling an overall expansion in manufacturing activities during the month of December 2019.


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


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


Expectations for Activity increased, yet at a slower pace, compared to the previous month. Respondents 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, this is the ninth consecutive month that the index on Employment of the Services sector continued to remain below 50.0 index points (threshold level). Backlogs of Work sub index reached the threshold level indicating that there is no change in backlogs compared to November 2019.


Source: Central Bank


 
 
 
 
 
 
 
 
 
 
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