Manufacturing accelerates in September; services slow

Sri Lanka’s manufacturing sector recorded healthy growth in the month of September while the services sector also expanded albeit at a slower rate, according to the Purchasing Managers’ Index (PMI) computed by the 
Central Bank.

The manufacturing sector PMI recorded 59.0 in September which is an increase of 4.6 index points compared to August 2017. This indicates that the manufacturing activities continued to expand in September 2017 at a higher rate compared to August 2017.  

This expansion was mainly driven by the increase in the employment sub-index which recovered from the contraction observed in the previous month with the recruitment of new employees.  
The production and new orders sub-indices expanded at higher rates in September. 

The stock of purchases sub-index increased at a slower rate due to the excess stocks level observed in the previous month. Suppliers’ delivery time lengthened, albeit at a slower rate compared to previous month. 

Overall, all the sub-indices of PMI recorded values above the neutral 50.0 threshold signalling an overall expansion in September 2017. Moreover, the expectation for activities remains positive for the next three months. Meanwhile the services sector PMI recorded 57.0 index points in September from 60.1 index points in August 2017. This indicates that the services sector continued to expand in September 2017 at a slower rate compared to August 2017. 

Employment and expectations for activity sub-indices increased marginally in September compared to August 2017. Business activity sub-index declined significantly but remained above the threshold. New businesses also decelerated while backlogs of work declined in September compared to August 2017. 

The accommodation, food and beverage sector reported a decline in business activity due to weather related developments.

With the removal of taxes on data usage, telecommunication sector expects an improvement in business activity. Prices charged increased at a slower rate in September compared to August 2017. 
Expectations on labour cost sub-index increased marginally in September 2017 due to seasonal year end benefits such as bonuses and festival advances.