Aug 17, Colombo: Both manufacturing and service activities in Sri Lanka declined in July 2022 , the Central Bank’s Purchasing Managers’ Index (PMI) Survey released Monday (August 15) showed.
Manufacturing PMI recording an index value of 41.4 declined 2.7 index points from the previous month in July 2022, indicating a contraction in manufacturing activities on a month-on-month basis.
This was driven by the decrease in all the sub-indices except Suppliers’ Delivery Time, the Central Bank report said.
New Orders declined particularly in the manufacturing of food & beverage sector due to subdued demand conditions. Deterioration of consumer purchasing power and reduced retail footfall due to fuel shortage were among the major reasons for the subdued demand condition.
Meanwhile, Production declined on a month-on-month basis, particularly in the manufacture of food & beverage sector, which was a combined outcome of subdued demand conditions and supply side concerns such as shortage of materials and fuel.
Employment also declined, particularly in the manufacture of food & beverage sector, mainly due to the discontinuation of casual employees. However, many respondents from the manufacture of textile and apparel sector mentioned that they were able to increase the employment count during the month.
The decline in the Stock of Purchases was in line with the decline in New Orders and Production, and partly due to the unavailability of required quantities of inputs in the domestic market and difficulties in importing materials.
Moreover, the Suppliers’ Delivery Time lengthened during the month, mainly on account of vessel delays, and diesel shortage.
Expectations for manufacturing activities for the next three months remained in the negative territory, as manufacturers are concerned over the subdued demand conditions in addition to the continuation of supply-side constraints.
Services PMI recorded an index value of 43.0 in July 2022 indicating a contraction in services activities for the fourth consecutive month.
This continual contraction was driven by the declines observed in New Businesses, Business Activities, Employment and Expectations for Activity, the Bank said.
New Businesses contracted further in July 2022 compared to June 2022, particularly with the deteriorations observed in transportation, real estate and accommodation, food and beverage sub-sectors.
Business Activities dropped further in July with the decreases observed across most of the sub-sectors amid the severe fuel shortage experienced during the month. In addition, as continuously highlighted by many respondents, the other supply side constraints as well as the subdued demand, driven by weakened economic conditions, price escalations and travel limitations also affected the business activities in the services sector negatively.
Accordingly, transportation, accommodation, food and beverage and other personal activities sub-sectors recorded considerable deteriorations during the month.
Employment continued to fall in July due to freeze in new recruitments and non-renewal of existing employment contracts amid subdued business activities, retirements and resignations.
Meanwhile, Backlogs of Work increased further during the month with supply shortages, especially related to fuel, transportation difficulties faced by staff and power outages.
Expectations for Business Activities for the next three months weakened, yet at a slower pace, due to the continuous struggle firms endure amid various supply side uncertainties in the country.