ECONOMYNEXT- Sri Lanka’s service sector continued its fall seen in April following the Easter Sunday attack, while the manufacturing sector showed some recovery, the central bank said.
The Purchasing Managers’ Index (PMI) for the services sector for May fell 0.6 points to 44.7 points.
An index value below 50 records a decline from a month earlier, and over 50 denotes a growth.
The services sector PMI in Sri Lanka had not fallen in Sri Lanka since it began in 2015, until the Easter Sunday attack took place in April.
The services sector accounts for two thirds of Sri Lanka’s economy.
The biggest contribution to the services PMI decline was from the employment sub index, falling to 36.4 points in May from 47.3 points in April.
“…it was mainly due to discontinuation of the service of contract employees with the deterioration in Business Activity, particularly in accommodation, food & beverage, and other personal services sub sectors,” the central bank said.
The travel and hospitality industries were the worst affected by the bombings.
The central bank said that the Business Activity sub-index also fell dueto weaker wholesale and retail trade and transportation activity.
“Many respondents highlighted that uncertainty which arose from Easter Sunday attack still prevails in the country.”
“Thus, New Businesses and Expectations for Activity continued to decline compared to previous month, yet at a slower pace.”
Meanwhile prices charged for services continued to increase, but at a lower rate, as hotels, restaurants and other personal service businesses offered discounts, the central bank said.
Labour costs are expected to grow at a faster rate over the next three months, the central bank said.
Meanwhile, the manufacturing sector PMI recovered to 50.7 points in May from 41 points in April.
Usually the manufacturing PMI falls in April due to the long holiday season, but the fall in April 2019 was the worst since the index began in 2015.
The recovery in May 2019 was also below usual recovery seen in previous years.
“The recovery of manufacturing PMI is mainly attributable to the significant increase in Production and New Orders, especially, in manufacturing of textiles, wearing apparels, leather and related products,” the central bank said.
“Many respondents, especially in textile and apparel sector, highlighted that they had to work extra hours on week days as well as in weekends during the month to clear the backlog of orders.”
Many workers living away from home due to work had returned home for the April holidays and remained there due to security concerns.
While new orders and production sub-indices recovered, the employment and stock purchases sub-indices fell.
“Employment contracted as a slight decline in new recruitments was observed, particularly, in manufacturing of food and beverages sector,” the central bank said.
“Although, the New Orders expanded, the Stocks of Purchases continued to contract yet at a slower rate, due to the stocks of raw materials brought forward from the previous month.”
“Suppliers’ Delivery Time lengthened at a slower rate due to security measures deployed after the Easter Sunday attack.”
Meanwhile the global manufacturing PMI fell 0.6 points to 49.8 points in May. Manufacturing PMIs of USA, UK, Eurozone, Russia and Singapore fell, while in China it was flat, and growth was seen in India. (Colombo/Jun15/2019)