Local economic activities get seasonal bump in December 

Sri Lanka’s economic activities across both manufacturing and services saw continued expansion through December 2024, in fact with more vigor due to heightened economic activities due to the year-end festive season, lower interest rates and of course the peak tourist arrivals season.

According to the Purchasing Managers’ Index (PMI) for December 2024, Sri Lanka’s manufacturing activities recorded an index value of 57.2 from 53.3 in November, reflecting faster expansion in manufacturing.

The services meanwhile recorded an index value of 71.1 in December up from 60.5 in November as such services activities accelerated towards the year-end.

In PMI, an activity is split between an expansion and a contraction at an index value of 50.0 and higher the index value above 50.0 tells that the activity is growing at a faster pace while an index value of 50.0 suggests that an activity is at neutral level.

Sri Lanka’s manufacturing activities have been growing consistently for over a year now with the exception in April due to extended holidays for the traditional New Year but the December expansion was predominantly to do, unsurprisingly with the year-end festive demand, especially from the food and beverage sector.

A closer look at the sub-indices showed that both New Orders and Production grew at a faster pace due to aforementioned reasons but the two didn’t get a lift from the textiles and apparel sector which in fact came down due to the decline in orders from Sri Lanka’s major buyers due to seasonal winter holidays.

This phenomenon weighed on the Employment sub-index too due to reduced casual labour requirement in the textiles and apparel sectors.

However, future expectations for the sector looks bright as manufacturers who took part in the PMI survey had expressed optimism over the near term economic outlook.

Meanwhile, the services activities, particularly in sectors such as wholesale and retail received a sizable bump up, again from the seasonal demand and also the peak season tourist arrivals.

Financial services saw a significant improvement in activities due to increased lending activities made possible by the low interest rates.

This was seen from the pick-up in credit to the private sector in November which appears to have further accelerated in December as the Central Bank delivered another cut in their policy rates in late November, effectively by 50 basis points.

In November, the licensed commercial banks gave a net Rs.96.6 billion in credit to the private sector, up from Rs.74.3 billion in October, taking the total 11-months credit to Rs.601.1 billion.

The services activities got a further tailwind from the personal services activities such as leisure which saw picking up due to the year-end holidays.

The New Businesses sub-index too grew at a faster pace in December due to the above reasons while the Employment in the sector continued to grow as businesses had to hire more people to meet the higher demand in the festive season which received a further increase from the rising tourist arrivals.

Services sector participants too remained upbeat over its near term future prospects buoyed by the favourable macro-economic conditions.