Manufacturing and services PMI expand in May

Sri Lanka’s economy continued humming as both manufacturing and services sector activities have expanded in May as reflected in the Purchasing Managers’ Index (PMI) data for the month.

Manufacturing activities picked up backed with an index value of 55.5 after a seasonality driven dip in April when the index fell to 40.1.

The services activities meanwhile recorded an index value of 57.0, slightly easing from 60.6 in April, signalling continuous expansion in the services sector, largely led by the relaxed monetary conditions which made possible increased lending activities.

The manufacturing sector PMI in May was led mainly by the textile and wearing apparel sector which pushed up both new orders and production sub-indices.

In fact in May all sub-indices under the manufacturing PMI rebounded above the neutral threshold, indicating a recovery from the seasonal slowdown in April.

In PMI, an activity is split between an expansion and a contraction at an index value of 50.0 while an index value over 50.0 indicates an expansion while the index below 50.0 is interpreted as a contraction.

An activity neither grows nor contracts when the index is at 50.0 level.

Under manufacturing, the employment sub-index also recovered, particularly due to manufacture of textiles and wearing apparel. 

The sector participants remain optimistic over the next three months as they anticipate a gradual increase in the demand.

However, they remain cautious about the upwards revision to the electricity tariffs and the tensions in the Middle East.

The expansion in services activities has been mainly underpinned by the financial services which are possible due to the lower interest rates which enabled higher lending activity.

Further, the business activities in professional services and wholesale and retail trade have also recorded significant growths during the months.

However, the business activities in the accommodation, food and beverage services declined during the month as tourist arrivals declined on a month-on-month basis.

Employment in services activities declines due to retirements and resignations reported across several companies.

The services sector participants too have high expectations for their business for the next three months due to favourable macro-economic conditions.