April manufacturing PMI retreats on fizzling festive demand

• Services held up

The traditional New Year-driven break took a toll on manufacturing activities, as usual, and less on services, as reflected by the Purchasing Managers’ Index (PMI) for April 2025.

This is typical during the festive month for all Sri Lankans, who took longer time off from their otherwise busy work schedules to be with their families and friends during the most joyous period of the year.

The manufacturing sector PMI recorded an index value of 40.1 for April, down sharply from 63.9 index points in March – the typical seasonal peak month for manufacturing ahead of the New Year.

The services sector PMI, meanwhile, recorded an index value of 60.6 in April, slipping from 69.8 in March, reflecting that services activity was still expanding, though at a slower pace than the previous month.

A PMI reading above 50.0 indicates expansion in activity, while a reading below indicates contraction; 50.0 marks the neutral level.

The PMI is a leading indicator of economic activity, typically released about 15 days after the end of each month.

Under manufacturing, the New Orders sub-index contracted due to the fading festive season demand, especially in the food and beverage sector. Further, the Production sub-index also declined, largely due to the fewer working days in April as manufacturing facilities halted their production for the New Year.

The Employment sub-index declined as manufacturers scaled back on temporary workers following seasonal production requirements.

The outlook for the next three months in the manufacturing sector remains strong, driven by expectations of an anticipated improvement in demand conditions.

Meanwhile, the services sector PMI was driven by wholesale and retail trade, which showed a notable expansion during the festive season, while business activities in financial services continued to improve due to increased lending activities.

Recent data showed that licensed commercial banks had expanded their total loans outstanding by Rs.173.2 billion in March, picking up strongly from the Rs.106 billion in February, signalling a strong appetite for new credit from businesses and individuals.

However, business activities, in general, were affected by the extended holidays in April, while freight forwarding companies, in particular, had been affected by the uncertainties surrounding the import tariffs imposed by the United States.

But the future outlook for the services sector remains upbeat, partly due to the temporary suspension of reciprocal tariffs by the US.  The Employment sub-index continued to increase due to new recruitments made by several companies, the PMI survey revealed.