March PMI indicates faster expansion in economic activities

Further strengthening the health of the economy, the Purchasing Managers’ Index (PMI) showed continuous expansion in activities across manufacturing and services sectors, rekindling hopes that the ongoing recovery is going to be durable and solid.

Accordingly, the manufacturing sector PMI recorded an index value of 62.5 in March, from 56.0 index points in February reflecting that the once languishing sector is now expanding at a rapid pace.

In fact March PMI reading is the highest in three years, in a further sign that the economy has unequivocally exited the crisis although some uncertainties remain.

Meanwhile, the services sector PMI recorded an index value of 67.7 in March, logging a significant increase from 53.0 index points in February. PMI is a broadly followed gauge to measure the health of an economy and provides a bellwether for the Gross Domestic Product. A reading above 50.0 in PMI indicates an expansion in activity while a level below that indicates a contraction. The index value of 50.0 reflects a neutral level.

The manufacturing sector PMI has been driven by all sub-indices led by new orders and production coming from manufacturing of food and beverages and textile and apparel.

“Most of the manufacturers, especially in the food & beverage sector, were optimistic about the upcoming festive season”, the Central Bank said citing the latest monthly survey. Meanwhile, the employment segment also improved as firms hired staff to cope up with the new orders and meet the higher production.

Further, the survey has also found that the prices have also declined during the month mirroring the cooler than anticipated inflation in March.

The manufacturing sector broadly has positive expectations for the next three months despite some slowing down during April following the seasonal peak.

Meanwhile, the services sector activity spurt has also been driven by the seasonal pop seen in both wholesale and retail trade due to the festive demand.

Further, the financial services subsector continued to be supported by the accommodative monetary policy of the Central Bank as financial conditions were seen easing with the decline in the borrowing rates. Meanwhile, accommodation and food and beverage sub-sectors continued to grow due to robust tourist arrivals while transport and other personal and professional services also saw growth.

New businesses across a wider section of services were also witnessed while the employment sub-index improved as firms hired new staff to meet the elevated festive demand. Meanwhile, expectations for business activities for the next three months continued to rise due to favourable macroeconomic conditions.