Economy begins 2022 with mixed result

• Manufacturing continues on a growth trajectory by 0.6 points uptick to index value of 58.7
• Services sector drops by 4.9 points in January to index value of 57.5

The economy began 2022 with mixed results, as the manufacturing sector reported an uptick, whilst the service sector lagged, as per the Purchasing Managers’ index (PMI) compiled by the Central Bank.

The manufacturing sector entered the growth territory with marginal increase of 0.6 points reporting an index value of 58.7 compared to December 2021. However, the Services PMI fell to a declining zone as it decreased by 4.9 points to an index value of 57.5 compared to December.

In manufacturing, the expansion in new orders, production and stock of purchases, particularly in the manufacture of textile and wearing apparel and food and beverage sectors, have mainly contributed to the improvement in the PMI.

“Although employment sub-index recovered to positive territory in January 2022, the employment sub-index with respect to the manufacture of textile and wearing apparel sector continued to decline, reflecting the difficulty in attracting employees to the sector,” CBSL said.

Stock of purchases increased in line with the expansion in new orders and production, but the suppliers’ delivery time lengthened at a slower pace in January on a month-on-month basis.

“Many respondents stressed that they experienced delays in receiving import consignments, partly due to the impediments in the clearance of shipping documents, opening of letters of credit (LC) and congestion at the port,” it said.

In the next three months, the expectations for manufacturing activities remain at elevated levels anticipating continuous improvements in economic condition, locally and globally.

Despite the decrease in the services sector, the expansion was underpinned by the increases observed in new businesses, business activities, employment and expectations for activity sub-indices.

“New businesses expanded further in January compared to December 2021, particularly with the improvements observed in transportation, professional services, other personal activities and education sub-sectors,” the CBSL said. 

However, amid the continuation of relaxed pandemic related restrictions, business activities indicated a softer growth in January 2022 compared to December 2021.

Accordingly, transportation and professional services sub-sectors reported significant improvements during the month. In addition, business activities in the accommodation, food and beverage sub-sector recorded further developments supported by the increase in tourist arrivals.

Meanwhile, business activities related to financial services, other personal activities and education sub-sectors also increased during the month.

Employment increased for the third month in a row in January as companies continued recruitments in order to support the increase in business activities.

It said backlogs of work continued to decline at a slower pace in January as most of the staff reported to work as usual.

Expectations for business activities for the next three months improved further in January in line with the optimism related to growth in business activities amid continuance of relaxed pandemic related restrictions, despite renewed increase in Omicron cases.

“Nevertheless, some respondents continued to mention the negative impact from import related restrictions and inflationary pressure to their business activities,” it added.