Manufacturing expands, service sector remains sluggish in May

The country’s manufacturing sector saw an upturn in May, whilst services sector showed a sluggish expansion, judging by the Purchasing Managers Index (PMI).

Following the seasonal dip in April, the Manufacturing PMI recorded an index value of 58.2 in May, indicating an expansion in manufacturing activities. 

In the first three months the Manufacturing PMI turned positive, after a dip in December 2023.  In April the Manufacturing PMI April failed to sustain the strong upturn recorded in the first quarter of 2024.

PMI compiler Central Bank of Sri Lanka said new orders and production sub-indices were mainly attributable to the manufacture of Food and Beverages sector increased during the month, resulting in an overall increase in the index.

As per the respondents, the considerable increase in production activities was due to more working days prevailed in May compared to the previous month. 

Stock of purchases increased considerably during the month, in line with the increase in new orders and production. However, suppliers’ delivery time further lengthened in May. 

“The industry expectations for the next three months remain positive, anticipating a gradual increase in demand. However, many respondents are cautious about the existing issues related to container availability in the global shipping industry,” CBSL said.

It also said the Services sector PMI indicated a slower expansion in services activities in May 2024 as reflected by the business activity index, which recorded an index value of 55.0.

The expansion in business activities was driven by the improvements observed across most sectors. Accordingly, business activities in the financial services continued to grow in line with the reductions in market interest rates. 

Further, business activities in the transportation services experienced a considerable growth, while telecommunication, real estate, health and professional services also recorded positive developments during the month. 

Nevertheless, business activities in the accommodation, food and beverages services declined further during the month in line with the decline in tourist arrivals on a month-on-month basis. Moreover, business activities related to wholesale and retail trade also declined with end of the festive season.

“New businesses increased in May, particularly with the increases observed in financial services,” CBSL said.

Employment increased in May due to new recruitments made by several companies. Meanwhile, backlogs of work continued to decline during the month.

“Expectations for Business Activities for the next three months continued to improve, at a higher rate, supported by favourable macroeconomic conditions,” CBSL added.