Services reach 16-month high; manufacturing expands at slower pace in Nov.

Sri Lanka’s manufacturing activities expanded at a slower pace in November while activities in the services sector reached a 16-month high with expectations over a greater stability in the political front.

Manufacturing PMI expanded in November recording an index value of 56, up from 54.6 index value recorded in November, last year, mainly due to the expansion in new orders, production and employment. However, the index value only decreased 1.6 index points compared to October 2019.

“New orders and production expanded at a slower rate mainly due to the slowdown in manufacturing of textile and wearing apparel. Employment slowed down marginally in line with these developments,” the Statistics Department of the Central Bank stated.

Although the new orders and production expanded at a slower pace in November, the stock of purchases expanded at a higher rate due to intended accumulation of stocks to fulfil the future requirements anticipating supply delays due to upcoming Christmas and New Year holidays.

As all sub-indices of PMI manufacturing, except suppliers’ delivery time which reached neutral level, the department noted that it signals an overall expansion in manufacturing activities during the month.

Meanwhile, services PMI recorded an increase of 0.5 index points compared to October reaching a 16-month high to 57.4 index points in November backed by the expansion in new businesses, business activity and expectations for activity.

The strongest growth was observed in expectations for activity, which posted the highest index value since June 2015.

The service sector survey respondents had cited that they expect a greater stability in the political front, while being optimistic on their business growth underpinned by new tax revisions.

Further, they expect that the upcoming peak season for tourism, festive season and the holiday season would contribute favourably towards their businesses during the period ahead.

There was a notable increase in business activities in accommodation and financial services sectors.

Despite the increase in employment in sectors such as accommodation, wholesale/ retail trade and personal services, the index on employment of the services sector continued to remain below the 50-threshold level for the eighth consecutive month.

New businesses also grew at a slower rate compared to October while backlogs of work recorded a decrease during the month, compared to October.