Downturn for manufacturing in April, service sector posts marginal expansion

The country’s manufacturing sector in April failed to sustain the strong upturn recorded in the first quarter of 2024, whilst the services sector showed a sluggish expansion, as per the Purchasing Managers Index (PMI).

Following the seasonal pattern, the Manufacturing PMI recorded an index value of 42.0 in April 2024, indicating a contraction in manufacturing activities. 

In the first three months the Manufactur-ing PMI turned positive, after a dip in December 2023. In March 2024 Manufacturing PMI turned positive recording an index value of 62.5.

PMI compiler Central Bank of Sri Lanka said new orders, production, employment and stock of purchases sub-indices declined during the month, resulting in an overall decline in the index. As per the respondents, the decline in new orders was mainly due to the end of the festive season’s demand, particularly for food and beverages.

 Further, the decrease in production was primarily due to the fewer working days in April, as most factories were temporarily closed for the Sinhala and Tamil New Year holidays. 

Employment and stock of purchases decreased during the month, in line with the decline in new orders and production. Meanwhile, suppliers’ delivery time further lengthened in April, owing to the extended holidays in the month.

“The industry expectations for manufacturing activities for the next three months remain positive, anticipating a gradual increase in demand,” CBSL said.

It also said the services sector PMI indicated a slower expansion in services activities in April 2024 as reflected by the business activity index, which recorded an index value of 56.7.

The expansion in business activities was driven by the improvements observed across several sub-sectors. Accordingly, business activities in the financial services sub-sector continued to grow following the reduction in policy rates in March 2024. 

Further, business activities in the wholesale and retail trade sub-sector experienced a considerable growth amid the seasonal demand.

Meanwhile, programming and broadcasting, telecommunication and real estate sub-sectors also recorded positive developments during the month. Nevertheless, the accommodation, food and beverage sub-sector declined slightly during the month in line with the decline in tourist arrivals on a month-on-month basis.

“New businesses increased in April, particularly with the increases observed in wholesale and retail trade, financial services and real estate sub-sectors,” CBSL said.

Employment declined in April despite some new recruitments made by several companies. Meanwhile, backlogs of work continued to decline during April.

“Expectations for business activities for the next three months continued to rise, yet at a slower rate, supported by favourable macroeconomic conditions,” CBSL added.