Manufacturing PMI hits 9-month high in March; services sector expands for 4th straight month

„Expectations for next 3 months remain positive with anticipated growth in economic activity

Sri Lanka’s manufacturing activities recorded a nine-month high in March while the services sector maintained its growth momentum for the fourth consecutive month, the Purchase Managers’ Index (PMI) released by the Central Bank showed yesterday.

The manufacturing PMI hit an index value of 67, a nine-month high, largely due to increases observed in Production, New Order and Stock of Purchases sub-indices.

The significant increases in New Orders and Production sub- indices, particularly in the manufacture of food & beverages and textile & wearing apparel sectors, have mainly contributed to the improvement in the overall index.

Many respondents in the manufacture of food & beverages sector had highlighted that they experienced higher levels of sales and production during March 2021 ahead of the New Year festival season.

Further, respondents from the textile & wearing apparel sector had mentioned that they increased production during the month to cover-up seasonal holidays.

Meanwhile, the Stock of Purchases subindex increased in line with the expansion in New Orders and Production. Employment sub-index also expanded at a higher rate.

The Suppliers’ Delivery Time sub-index lengthened at a slower pace during the month. Many respondents had highlighted that some easing in suppliers’ delivery time was experienced with the gradual resolvement in shipping related issues.

However, freight rates remain at elevated levels, increasing the cost of raw materials, which in turn adversely affected their profit margins.

Expectations for manufacturing activities in the next three months remained at improved levels anticipating a further improvement in economic activities within the country as well as in major export markets.

Meanwhile, Services sector PMI recorded an index value of 62.1 indicating an expansion in the services sector for the fourth straight month.

This increase was underpinned by the expansions observed in new businesses, business activities, employment and expectations for activity.

New businesses in the services sector increased in March 2021, particularly with the improvements observed in financial services, other personal services, and wholesale and retail trade sub-sectors.

Moreover, other personal services subsector also experienced an increase in March 2021. Meanwhile, education sub-sector continued to expand amid the increased demand for higher education followed by G.C.E. Ordinary and Advanced Level examinations.

Employment increased in March 2021 for the first time after declining for 13 consecutive months due to new recruitments amidst growing business activities.

Backlogs of work decreased in March 2021 for the second month in a row in line with the increase in staffing levels, which were previously at a low level due to COVID-19 related health concerns.

Expectations on business activities for the next three months increased further in March 2021 underpinned by the optimistic expectations on growth prospects amid Sinhala and Tamil New Year and Ramadan festive seasons.