August PMI indicates expansion in services, softening of contraction in manufacturing

• Manufacturing PMI records index value of 49.3
• lServices sector PMI records index value of 57.6 

Sri Lanka’s Purchasing Managers Indices (PMI) in August 2023 indicated an expansion in services activities and a softening of the contraction in manufacturing activities.
The country’s manufacturing activities are sowing since of recovery when compared with previous months, with the Manufacturing PMI recording an index value of 49.3 in August 2023, reaching closer to the neutral threshold.

Considering the sub-indices, New Orders and Suppliers’ Delivery Time increased during the month, while Production and Employment remained contracted. 
The overall increase in New Orders was mainly driven by the manufacture of food & beverages sector, in response to the continuous downward revisions in retail prices. 

According to the Central Bank, most of the respondents in the manufacture of food and beverages sector mentioned that there was an upturn in their overall business activities during the month. 
Meanwhile, the continuous setback in Production was headed primarily by the manufacture of textiles and wearing apparel sector due to the ongoing subdued global demand.

Employment remained contracted in August as well, while Stock of Purchases remained unchanged on a month-on-month basis. Meanwhile, Suppliers’ Delivery Time lengthened during August compared to the previous month.
Expectations for manufacturing activities for the next three months indicated an improvement, particularly due to the relaxed import restrictions, decline in borrowing rates and decrease in raw material prices, the Central Bank said.
Meanwhile, Services sector PMI recorded an index value of 57.6 in August 2023, indicating a continued expansion in services activities, led by the increases observed in New Businesses, Business Activities and Expectations for Activity.

However, employment remained unchanged, while Backlogs of Works remained contracted during the month. 
New Businesses increased in August 2023 compared to July 2023, particularly with the increases observed in financial services, wholesale and retail trade, other personal activities, professional services, and education sub-sectors. 

Business Activities continued to expand in August 2023 showing positive developments in several sub-sectors. Accordingly, accommodation, food and beverage, and other personal activities sub-sectors recorded increases during the month largely attributable to high tourist arrivals. 
The Central Bank pointed out that improvements in domestic tourism also played a significant role in driving this growth. 

Furthermore, driven by a rise in credit demand in the backdrop of low market interest rates, the financial services subsector also exhibited further improvements during the month. Employment remained at the same level following the increase recorded in the previous month. Backlogs of Work decreased, yet at a slower pace, during the month.
Expectations for Business Activities for the next three months continued to increase at a slower pace in August attributed to expected improvements in economic activities led by improved demand amidst relaxed import restrictions, the Central Bank said.