Economic activity strengthens ahead of year-end demand

The continuous growth in economic activities was seen further from the Purchasing Managers’ Index (PMI) data for September which showed persistent expansion in both manufacturing and services sectors which was out this week.

The manufacturing PMI recorded an index value of 55.4 for September, slightly up from the 55.2 index points in August, reflecting the continued growth in the activities which has now been growing for two years continuously.

The services PMI meanwhile recorded an index value of 58.7 for September, compared to 68.9 in August, suggesting continuous expansion, although at somewhat a slow pace from August.

In PMI, a reading above 50.0 index value indicates an expansion while a value below 50.0 is a contraction. If the activity has an index value of 50.0, then it has neither expanded nor contracted.

The manufacturing sector has been driven mainly by the new orders and the production sub-indices, largely attributed to the manufacturing of textiles and wearing apparel in a sign that the foreign customers have placed orders with the local manufacturers, readying for the upcoming year-end festive season.

The stock of purchases sub-index rose mainly due to the planned accumulation of inventory, again in preparation for the festive season.

However, in a highlight in September, the employment sub-index contracted in a sign of losing employment in the sector which many firms cited as the difficulty in retaining and attracting the skilled talent in the sector.

The sector participants nevertheless remain upbeat over the next three months’ outlook on the sector, predominantly due to the expectations of strong year-end seasonal demand.

The services sector was driven mainly by the strong performance in wholesale and retail trade, followed by the expanding financial services which was possible from the increased lending activity.

Employment in the sector continued to increase as the companies hired new staff to meet the ongoing operational requirements.

The expectations in the services sector too remain upbeat, supported by the, “favourable macroeconomic conditions, increased tourist arrivals, and the anticipated boost from the upcoming festive season”, the Central Bank stated.