Lack of new projects continues to hamper construction sector

The construction industry continued to perform at a subdued level in August 2023, according to Sri Lanka Purchasing Managers’ Index (PMI) for the sector compiled by the Central Bank of Sri Lanka.

Nevertheless, CBSL said the construction industry reached the neutral threshold, recording a Total Activity Index value of 47.0.

As per the respondents, firms tend to undercut prices to secure the limited available projects in a highly competitive tender bidding process.

“The lack of new projects continued to have a severe adverse impact on the industry as reflected by the continuous decline in New Orders,” CBSL said.

Many respondents highlighted that the limited availability of local and foreign-funded construction projects is still a major concern in the industry. 

In this background, firms discontinued contract-based employees to scale down operations as reflected by the continuous decline in Employment.

Further, the Quantity of Purchases continued to decline, yet at a slower rate during the month. In the meantime, Suppliers’ Delivery Time was shortened during the month mainly due to reduced pressure on supplier capacity.

CBSL said the sentiment amongst the firms towards the next three months remained positive as they experienced an improvement in availability of projects from September mainly due to the expected recovery in the economy.