Economic activity continues to expand despite slowdown in manufacturing and services sectors
October 17, Colombo (LNW): Sri Lanka’s Purchasing Managers’ Index (PMI) for both manufacturing and services sectors indicated ongoing expansion in economic activities through September 2024, though both sectors experienced a slight slowdown compared to the previous month.
The PMI for manufacturing registered an index value of 54.1 in September, a modest decline from August’s reading of 55.5. Similarly, the services sector saw its PMI drop to 53.4, down from a more robust 65.2 in August.
A PMI reading above 50.0 indicates expansion, while values below this threshold signal contraction. Despite the elections held in September, economic activity remained resilient, continuing its expansion, though at a slightly softer pace.
The manufacturing sector’s growth was driven by an increase in new orders and production, particularly within the food and beverage industry. This upsurge was supported by preparations for the year-end festive season, which is expected to bring heightened demand from both domestic and export markets.
Businesses have begun to stock up on materials in anticipation of this seasonal increase in consumption, leading to a rise in inventory levels. Although employment in the sector continues to contract, the rate of decline has slowed, suggesting that companies are gradually rehiring to meet production needs.
Meanwhile, the services sector was buoyed by improving financial conditions, as lower lending rates have encouraged businesses to borrow for working capital and investment purposes.
Some firms have also sought to refinance earlier loans taken during periods of higher interest rates. Notably, business activities in education, professional services, programming, and broadcasting expanded during September.
However, sectors such as wholesale and retail trade, IT programming, and telecommunications remained stable, with no notable growth compared to August.
Employment within the services sector also saw a continued decline, although at a slightly slower pace. Overall, Sri Lanka’s economy is performing well in 2024, as indicated by the PMI readings.
The country has managed to move beyond the severe foreign currency crisis that hampered its economic progress in late 2021, with growth now becoming more sustainable.
