Sri Lanka’s manufacturing PMI rose sharply to 56.6 in May from 42.6 in April, indicating an expansion in manufacturing activity, according to the Central Bank of Sri Lanka (CBSL). The manufacturing and services sectors returned to growth in May 2026, with Purchasing Managers’ Indices (PMIs) signalling improved business activity despite concerns over the ongoing Middle East conflict and broader global uncertainties.

The growth in new orders and production was largely driven by the textiles and apparel industry. New orders increased to 52.6 from 36.4 in April, while production climbed to 54.6 from 30.5. Employment also improved to 59.7 from 47.0, reflecting stronger factory activity. Stock of Purchases rose to 52.6 from 44, supported by higher demand and production requirements, CBSL said in a press release.

Manufacturers attributed part of the improvement to a higher number of working days in May compared with the previous month. However, supplier delivery times remained extended, with the index at 66.3, indicating continued supply-chain delays. Businesses also noted that the challenging operating environment linked to the Middle East conflict continued to affect operations and sentiment.

The country’s PMI for services recorded an index value of 56.9 in May 2026, indicating an expansion in services activities compared to the previous month.

Business activity expanded mainly due to stronger performance in financial services, professional services and other personal services. New business volumes increased, led by gains in financial and professional services, while wholesale and retail trade, personal services and goods transportation contributed positively.

However, employment in the services sector declined because of contract expirations, retirements and resignations. Backlogs of work also continued to fall at a faster pace than in the previous month.

Looking ahead, businesses in both sectors remain optimistic about activity over the next three months. Manufacturing firms expect operations to remain above the neutral threshold, while service providers anticipate stronger demand supported by higher tourist arrivals during the Perahera season and improving domestic economic conditions.

CBSL noted that risks associated with the Middle East conflict and wider global uncertainties continue to weigh on business confidence and could affect future growth prospects.

Fibre2Fashion News Desk (SG)