Man­u­fac­tur­ing drops to all-time low in April

Daily Mirror (Sri Lanka) - - MIRROR BUSINESS -

„New Year hol­i­days and Easter Sun­day at­tacks key rea­sons „Ser­vices PMI records value be­low neu­tral 50 thresh­old for first

The man­u­fac­tur­ing ac­tiv­i­ties con­tracted, record­ing the all­time low in­dex value of 41.0 in April 2019, with a de­cline of 25.9 in­dex points from March 2019, the Cen­tral Bank said this week.

The de­cline of Man­u­fac­tur­ing PMI is mainly driven by the sig­nif­i­cant drop in new or­ders and pro­duc­tion, es­pe­cially in man­u­fac­tur­ing of food, bev­er­ages and to­bacco and man­u­fac­tur­ing of tex­tiles, wear­ing ap­par­els, leather and re­lated ac­tiv­i­ties prod­ucts.

This de­cline was mainly due to the

New Year hol­i­days in April and the se­cu­rity con­cerns that arose fol­low­ing the Easter Sun­day at­tacks, which af­fected the smooth func­tion­ing of fac­tory op­er­a­tions.

Most re­spon­dents, es­pe­cially in the tex­tile and ap­parel sec­tor, high­lighted that they had to re­strict work­ing hours in fac­to­ries due to se­cu­rity con­cerns and were un­able to achieve the de­sired pro­duc­tion lev­els.

Em­ploy­ment also dropped sig­nif­i­cantly, as a higher num­ber of em­ploy­ees were ab­sent af­ter the New Year hol­i­days. The stock of pur­chases de­creased due to the de­cline in new or­ders at the end of the New Year sea­son, and brought for­ward stocks of raw ma­te­rial from pre­vi­ous month.

The Sup­pli­ers’ De­liv­ery Time length­ened at a higher rate due to in­creased se­cu­rity mea­sures af­ter the Easter Sun­day at­tack.

All sub-indices ex­clud­ing Sup­pli­ers’ De­liv­ery Time of Man­u­fac­tur­ing PMI recorded val­ues be­low the neu­tral 50.0 thresh­old, sig­nalling an over­all con­trac­tion in man­u­fac­tur­ing ac­tiv­i­ties in April 2019 com­pared to March 2019.

Mean­while, the ser­vices sec­tor de­te­ri­o­rated in April 2019, com­pared to March 2019, un­der­pinned by a de­cline in all five sub-indices, namely, New Busi­nesses, Busi­ness Ac­tiv­ity, Em­ploy­ment, Back­logs of Work and Ex­pec­ta­tions for Ac­tiv­ity.

This is the first time that the Ser­vices PMI recorded a value be­low the neu­tral 50.0 thresh­old, sig­nalling over­all de­te­ri­o­ra­tion in Ser­vices sec­tor, since May 2015, when con­duct­ing of the sur­vey be­gan.

The de­te­ri­o­ra­tion in New Busi­nesses, Busi­ness Ac­tiv­ity, and Ex­pec­ta­tions for Ac­tiv­ity was mainly due to the Easter Sun­day at­tack and pre­vail­ing un­cer­tainty in the coun­try. This was ob­served across a ma­jor­ity of the sub­sec­tors in the ser­vices sec­tor, par­tic­u­larly in ac­com­mo­da­tion, food and bev­er­age and other per­sonal ser­vices sub-sec­tors, which largely de­pend on the tourist ar­rivals and whole­sale and re­tail trade and trans­porta­tion sub sec­tors, which largely de­pend on the day-to-day ac­tiv­i­ties of the peo­ple. Re­spon­dents cited that lim­i­ta­tion of busi­ness hours due to im­po­si­tion of is­land­wide cur­fews and low pro­duc­tiv­ity of the staff due to fear as rea­sons for de­te­ri­o­ra­tion in busi­ness ac­tiv­ity. How­ever, they ex­pect this sit­u­a­tion to be nor­malised by June 2019.

The prices charged in the ser­vices sec­tor in­creased at a slower rate in April 2019 due to price in­creases re­lated to the New Year fes­ti­val. Also the ex­pected labour cost in the ser­vices sec­tor in­creased at a slower rate due to the re­al­i­sa­tion of ex­pected salary in­cre­ments in April 2019.

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