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Sri Lanka’s manufacturing and services contract in October


Sri Lanka’s manufacturing sector contracted significantly in October with the decline of people’s purchasing power meanwhile services sector has also declined, according to a Purchasing Managers’ Index compiled by the central bank.

Manufacturing PMI declined in October 2022, indicating a contraction in manufacturing activities on a month-on-month basis. Accordingly, Manufacturing PMI recorded an index value of 38.4 in October 2022, with a decline of 4.2 index points from the previous month, driven by decreases recorded in all the sub-indices.

New Orders and Production declined significantly, particularly in the manufacture of food & beverages and textiles & wearing apparel sectors, mainly due to demand-side impediments. Many respondents representing the food & beverages sector mentioned they experienced a notable decline in demand amidst the deteriorating purchasing power of the consumers.

Further, export-oriented manufacturers, especially in the apparel sector catering to the North American and European markets, highlighted that the decline in demand observed was mainly attributable to the fear of an economic slowdown in respective destinations. Moreover, manufacturers are still struggling to acquire the required raw materials amidst high input costs.

Furthermore,Employment recorded a decrease in October 2022 while Stock of Purchases also decreased in line with the decline in New Orders and Production.

Meanwhile, Suppliers’ Delivery Time was shortened in October 2022 compared to the previous month.

Services PMI dropped below the neutral threshold to an index value of 47.9 in October 2022 due to the declines observed in New Businesses, Employment and Backlogs of Work. Nevertheless,Business Activities and Expectations for Activity continued its increasing momentum during the month.

New Businesses declined slightly in October 2022 compared to September 2022, particularly with the decreases observed in real estate, insurance, and postal and courier activities sub-sectors.

Business Activities in the services sector increased for the fourth straight month in October 2022 in line with the improvements in economic conditions.

Accordingly, business activities related to other personal activities, financial services, education, professional services, and programming and broadcasting sub-sectors showed improvements compared to the previous month.

However, business activities specifically in wholesale and retail trade, and real estate sub-sectors declined mainly due to diminishing purchasing power of consumers, increase in Value Added Tax (VAT) and imposition of Social Security Contribution Levy (SSCL).

Employment continued to fall in October due to increasing resignations, migrations and retirements in addition to halt in new recruitments. Meanwhile, Backlogs of Work continued to drop during the month amid reduction in new businesses.


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