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Manufacturing and services activities slow in May due to COVID-19 related restrictions

16 June 2021 08:27 am - 0     - {{hitsCtrl.values.hits}}

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  • Services PMI records lowest reading since April 2020
  •  Expectations for business activities for next three months weaken further

Manufacturing activities contracted during May due to adverse impacts of the third wave of COVID-19 pandemic and related restrictions imposed to contain the virus spread.


The manufacturing PMI recorded an index value of 42.1 in May 2021 with a fall of 2.2 index points from the previous month, mainly driven by the significant contraction in Production, Employment, New Orders and Stock of Purchases sub-indices.


The Production, especially in the manufacture of food & beverages and textiles & wearing apparel sectors, declined significantly together with the decline of Employment mainly due to the continued increase in uninformed absence.


On top of this, many respondents in those sectors highlighted that their production plans were largely disrupted due to a significant reduction of employee availability amidst mobility restrictions imposed in mid-May.

The New Orders also declined during the month, especially in the manufacture of food & beverages sector, with the end of seasonal demand and the resurgence of the pandemic. In line with these developments and the deterioration in accumulated stocks of raw material, the Stock of Purchases contracted.


The Suppliers’ Delivery Time further lengthened at a higher pace in May 2021 mainly due to the delays in receiving imported and local supplies. Further, many respondents highlighted that elevated freight rates increased the cost of imported raw materials and affected adversely on profit margins.


The sub-index of Expectations for manufacturing activities for the next three months increased with the positive anticipation on the normalisation of economic activities in the coming months supported by the progress of COVID-19 vaccination programme and the curtailing of the pandemic with mobility restrictions.


Meanwhile, in line with the escalation of the third wave of COVID-19 pandemic, services PMI dropped further to 39.5 in May 2021, recording the lowest reading since April 2020.


This decline was underpinned by the deteriorations observed in new businesses, business activities, employment and expectations for activity.


New businesses in the services sector declined at a faster pace in May 2021 compared to April 2021 with declines observed in most subsectors. However, the human health activities sub-sector saw an improvement with the setup of new COVID-19 treatment centres.


 Business activities in the services sector saw a sharper decline in May 2021. Declines were observed almost across all the sub-sectors caused by the drop in demand for non-essentials and constraints to business operations amid travel restrictions imposed to contain the spread of the third wave of COVID-19 pandemic. Wholesale and retail trade, other personal activities and accommodation, food and beverage, and professional services sub-sectors contributed the most towards the decline in overall business activities. Nevertheless, business activities in human health activities, and IT programming consultancy and related activities sub-sectors remained at the same level as in the previous month.


Employment continued to decline in May 2021 due to retirements, resignations and contract expirations amid the absence of new recruitments.


Backlogs of work increased further in May 2021 with continued localized lockdowns and island wide travel restrictions imposed towards the latter part of the month.


Expectations for business activities for the next three months weakened further in May 2021 due to the anxiety among businesses about growth prospects with the intensification of COVID-19 pandemic. 

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See Kapruka's top selling online shopping categories such as Toys, Grocery, Flowers, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,News, Courier/Delivery, Food Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka.

 


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