Slowdown in manufacturing and service sectors, says CB

The slowdown in manufacturing activities in September driven mainly by a slowdown in new orders and production, especially in manufacturing of food and beverages activities led to the Central Bank ( CB)’s Manufacturing Sector PMI decreasing to 54.1 index points in September from 58.2 index points in August.

In a media release, the CB said respondents highlighted that they had to increase their prices during the period due to increase in input cost of imported raw materials with rupee depreciation. This led to a decline in demand for their products, which in turn resulted in a decrease in new orders and production. However, new orders and production of manufactur- ing of textiles, wearing apparel, leather and other related products, which are mostly export oriented improved during this period. Overall employment and stock of purchases also slowed down.

“Meanwhile, lengthening of suppliers’ delivery time usually indicates that economy is booming with expanding activities in the short run. However, in this instance, lengthening of suppliers’ delivery time was due to manufacturers’ intentional increase of the lead time with the expectation of rupee stabilisation. Thus, it does not indicate an expansion in economic activities,” the CB said.

Overall, all the sub- indices of PMI recorded values above the neutral 50 threshold signalling an overall expan- sion in September yet at a slower pace compared to August.

The Services Sector PMI declined to 53 index points in September from 57 index points in August, indicating that this sector expanded at a slower pace in September and recording the lowest index value since the survey began in May 2015.

The slowdown in the Services sector was mainly due to the significant slowdown of business activities in accommodation food and beverage, wholesale and retail trade, health activities and other personal services sectors. The off- peak season for tourism, and slowdown in import volumes were cited as main reasons for the observed slowdown. New businesses growth also eased across financial ser- vices and insurance sectors. Employment levels expanded at a slower rate in September which was partly due to a slowdown in business activities. Service providers’ outlook on the three months business activities strengthened, yet at a slower pace, the CB said.

Upward revisions to fuel prices, depreciation of local currency and restrictions on imports were cited by respondents to have adversely affected their optimism. Prices charged in the Services sector increased at a higher rate owing to upward revisions to fuel prices and depreciation of local currency during the month.

Expected labour cost in the services sector also increased during September.