Sri Lanka manufacturing, services expand in Dec 2023 amidst challenges
By: Staff Writer
January 18, Colombo (LNW): Sri Lanka’s manufacturing and service sectors are currently expanding amidst significant challenges due to demand destruction policies and a temporary slowdown in the apparel export market.
Monetary tightening and higher inflation in major markets like the US and Europe have contributed to a drop in the Industrial Production.
However, there are signs of improvement, with the Central Bank’s Purchasing Managers’ Index for December 2023 showing an expansion in the broader manufacturing and service sectors after a long term decline.
Manufacturing PMI recorded an index value of 52.7 in December 2023, indicating an expansion in manufacturing activities. This improvement was attributable to the increases observed in all the sub-indices except Employment.
The increases in New Orders and Production were driven by the manufacture of food and beverages sector with the seasonal demand.
However, New Orders and Production in the manufacture of textiles and apparel sector declined during the month, which mainly contributed to the decline in Employment as well.
Meanwhile, stock of purchases increased during the month due to the increase in Production and New Orders. Further, Suppliers’ Delivery Time continued to lengthen in December.
Expectations for the manufacturing activities for the next three months remain positive. However, the firms are concerned about the impact of tax revisions from January 2024, and the shipping disruptions due to the unrest in the Red Sea, Central Bank predicted.
Services sector PMI recorded an index value of 58.9 in December 2023 indicating an expansion in the services activities.
This was led by the increases observed in New Businesses, Business Activities and Expectations for Activity, CB report revealed.
New Businesses increased in December 2023 compared to November 2023, particularly with the increases observed in wholesale and retail trade, financial services, insurance, other personal service activities and accommodation, food and beverages sub-sectors.
Business Activities continued to expand in December 2023 at a higher pace in line with the positive developments observed in many sub-sectors.
Accordingly, significant improvements were observed in business activities related to other personal service activities, transportation and accommodation, food and beverage sub-sectors, amid the festive and holiday seasons, and tourist arrivals reaching its peak.
Further, the wholesale and retail trade sub-sector showed a strong growth due to seasonal sales. Meanwhile, financial services also improved further in line with the increase in lending activities.
Employment declined despite some new recruitments made to meet the seasonal demand, while Backlogs of Work also continued to decline during December.
Expectations for Business Activities for the next three months continued to rise in December at a slower pace despite concerns regarding the adverse impacts of VAT amendments and related increases in fuel and utility costs.