18 April 2020 12:00 am
Sri Lanka’s Purchasing Managers’ Index (PMI) fell sharply to record an all-time low in March, reflecting how deep the economic fallout of COVID-19 amid lockdowns is.
The manufacturing sector PMI recorded an all-time low index value of 30.0 in March, declining by 23.6 index points from February.
The services sector PMI for the month recorded an index value of 32.0, a decline of 18.2 index points from February.
“The decline of manufacturing PMI was mainly driven by the significant contraction of Production and New Orders sub-indices of PMI reflecting the significance of the COVID-19 pandemic to the Sri Lankan manufacturing sector,” a Central Bank statement said.
The sub-index, Production plunged from 54.8 index points to 5.2 points through the month while the New Orders sub-index slumped from 51.1 index points to 18.7 points from February
to March.
Significant contraction in sub-indices of Production, New Orders and Stock of Purchases was due to the closure of manufacturing companies since mid-March and halting of production activities.
Meanwhile, the orders received at the beginning of the month from USA and Europe, particularly for textiles and garments were subsequently cancelled due to the rapid spreading of the virus in those markets, the Central
Bank said.
Meanwhile, the suppliers’ delivery time lengthened in March due to delays in shipments and local logistics.
When the virus was fast spreading in China and neighbouring countries in January and February, Sri Lankan industrialists led by textile and garment manufacturers and construction sector among others raised concerns about supply chain disruptions, which could force them to suspend their production as much of Sri Lanka’s industrial exports depend on imported raw materials.
They had also cautioned that disruptions to supply chains and demand could linger for some time deteriorating their manufacturing activities significantly for the next three months.
Meanwhile, the government this week allowed the Board of Investment companies to resume operations subject to strict health guidelines, and the Export Development Board slashed their export earnings projections considerably to US$ 10.5 billion for 2020 from an earlier US$
18.5 billion.
EDB Chairman Prabhash Subasinghe stressed the need to become realistic in the way forward and termed it a “marathon” and not a “race”.
Forebodings were seen also in the services sector with the steeper fall in the sub-index ‘Expectation for Activity’ from 52.7 index points to 16.9 points between February and March.
“Expectations for Activity sub index declined to its all-time low in March 2020 as respondents were concerned about the expected fall in consumer demand emanating from the reduction in discretionary spending and personal income, import restrictions and fall in tourist arrivals,” the statement said.
“New Businesses and Business Activities declined mainly in services related to tourism industry such as hotels, travel agents, and recreation activities. In addition, domestic travel restrictions imposed in line with the lockdown of the country and slowdown in cargo handling have affected business activities of the transportation sub sector negatively.
Even though the wholesale and retail trade sector observed an increase in demand with stockpiling, the demand could not be catered due to the issues with staff availability and delivery networks”, the Central Bank further said.
Meanwhile, the employment in the services sector has continued to decline due to the discontinuation of contractual and casual employees amid the freeze of new recruitments.