Ethnic tensions hit service sector activities in March

Sri Lanka’s service sector activities remained flat in March as the ethnic tensions hit the business activities in some parts of the country, the latest Central Bank of Sri Lanka’s (CBSL) Purchasing Managers’ Index (PMI) indicated.

Sri Lanka’s manufacturing activities hit 12-month high in March, largely driven by the increase in demand from Sri Lanka’s biggest holiday season. The manufacturing PMI recorded 65.6 index points in March, compared to 55.6 PMI points in February.

However, the manufacturing activities slightly slowed down by 1.1 index points from 66.5 index points in March 2017.

Although business activities usually experience a seasonal upturn during March, compared to February, the services sector PMI declined marginally in March by 0.4 index points to 58 index points, which was mainly due to the fall in activities in accommodation, food and beverage services, transportation and wholesale and retail trade sectors.

The Central Bank said the respondents noted that the ethnic tensions in some areas of the country affected their business activity levels during March. The service sector activities also slowed down by 2.8 PMI points year-on-year, from 60.8 index points.

The expansion in new businesses remained strong during the period and was observed across the financial service, insurance and wholesale and retail trade activities. Most manufacturing sector respondents highlighted that the textiles and apparel sector faced difficulties in finding both skilled and unskilled workers.

Overall, the sub-indices of PMI recorded values above the neutral 50.0 threshold and the expectation for activities remains positive for the next three months.

Th e island nation saw an increase in employment in March 2018, continuing its trend observed in previous month, while a modest expansion was observed in expectation for activity.