Manufacturing slows in December: PMI

Manufacturing activities increased at a slower rate in December, compared to November, mainly driven by the slowdown in employment and production, the Purchasing Managers Index (PMI) showed, while costs of services also increased due to currency depreciation. 

Production slowed down in manufacturing of textiles, wearing apparels, leather and related activities. A significant decline in employment was experienced as some employees moved to seasonal jobs for better salaries. 

This partly impacted on decrease in production. However, new orders increased mainly driven by the manufacturing of food and beverages activities with the continued festival season demand.

Meanwhile, stock of purchases indicates an increase due to intended accumulation of stocks to fulfil the future requirements anticipating supply disruptions due to upcoming Chinese new year festival. In line with this, suppliers’ delivery time also lengthened.

All the sub-indices of PMI Manufacturing except employment recorded values above the neutral 50.0 threshold, signalling an overall expansion in December yet at a slower pace compared to November 2018. Services sector growth accelerated in December 2018, underpinned by a strong upturn in Business Activities, Expectations for Activities and New Businesses. Business Activities sub index reached a ten-month high in December as wholesale and retail trade and accommodation, food and beverage sub sectors posted a strong growth due to the festive season and peak season for tourism. 

Transportation of goods recorded a growth with increased transhipment volumes while other personal services such as leisure activities also improved with the holiday season. The growth in new businesses were observed across financial services, insurance and professional services due to favourable demand conditions.

Despite the strong rise in Business Activities, the rate of job creation slowed among many sectors in December due to delays in filling open positions.

Prices Charged of the Services sector increased due to depreciation of the local currency and recent interest rate hikes while the expected Labour Cost in the services sector increased at a slower pace during December.

Source: Central Bank of Sri Lanka