Domestic demand resilient despite logistical strains: PMI Data

Sri Lanka’s private sector closed 2025 on a firm footing as both manufacturing and services activities expanded sharply in December, highlighting resilient domestic demand and improving business sentiment despite early weather-related disruptions. 

Data released by the Central Bank of Sri Lanka (CBSL) indicated a strong finish to the year, underscoring a broad recovery in economic momentum.

The Manufacturing Purchasing Managers’ Index (PMI) rose to 60.9 in December, remaining well above the neutral 50-point threshold to signal a sustained pickup in factory activity. This growth was broad-based across all sub-indices, primarily driven by new orders and production. 

Seasonal demand—particularly within the food and beverage sector—successfully offset logistical bottlenecks caused by adverse weather conditions.

Expanding order books translated into higher employment levels and an increased stock of purchases, suggesting that firms are gearing up for continued demand rather than viewing the December surge as an isolated event. However, supplier delivery times lengthened further, reflecting both stronger input demand and lingering transport disruptions, serving as a reminder that supply-side frictions have not completely eased.

The services sector notably outperformed manufacturing, with the Services PMI jumping to 67.9 to signal a robust acceleration in activity. Wholesale and retail trade emerged as the primary growth engine amid festive season spending, while accommodation, food and beverage, and other personal services also recorded solid gains. Financial services contributed significantly to the momentum, supporting an overall increase in new business volumes.

Employment within the services sector continued to rise as firms expanded their workforces to meet year-end operational requirements. Meanwhile, backlogs of work grew for a second consecutive month, indicating that demand is currently outpacing capacity in specific segments of the sector.

Looking ahead, business expectations for the upcoming quarter have turned increasingly optimistic. This sentiment is underpinned by improving macroeconomic conditions, anticipated seasonal tourism inflows, and the gradual normalisation of operations following recent weather-related disruptions.