Strong upturn for manufacturing; service sector posts marginal expansion in September

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

The manufacturing PMI recorded an index value of 54.1 in September 2024. This indicates a continued expansion in manufacturing activities, albeit at a decelerated pace relative to the previous month. 

PMI compiler Central Bank of Sri Lanka said all sub-indices, except for Employment, remained above the neutral threshold during the month.

“The expansions in new orders and production were largely attributed to the food and beverages manufacturing sector. In addition, stock of purchases increased during the month, stimulated

by the intended accumulation of inventory ahead of the upcoming festive season,” CBSL said. Employment remained contracted, yet at a slower pace in September. 

Meanwhile, suppliers’ delivery time continued to lengthen during the month.

The outlook for manufacturing activities over the next three months remains positive, driven largely by optimism on year-end seasonal demand.

CBSL also said the services PMI as reflected by the Business Activity Index, recorded an index value of 53.4 in September 2024. This indicates a slower expansion in services activities compared to the previous month. 

It added the expansion in business activities was driven by the improvements observed across some major sectors. Accordingly, business activities in the financial services experienced a significant improvement, largely driven by the prevailing favourable interest rates, which stimulated lending activities. 

Further, business activities in education, professional services, programming and broadcasting, real estate and transportation also grew during the month. However, business activities in the wholesale and retail trade, IT programming and telecommunication remained unchanged from the previous month, while declines were recorded in activities of all other sectors.

“New businesses increased in September, particularly with the expansions observed in financial services activities,” CBSL said.

Meanwhile, employment continued to decline in September. Further, backlogs of work decreased on month-on-month basis, following an improvement recorded in the previous month.

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