Sri Lanka’s economy showed strong momentum in March 2025, with both the Manufacturing and Services Purchasing Managers’ Indexes (PMIs) signaling significant expansions.
The Manufacturing PMI surged to 63.9, marking the highest index value in four years. This growth was fueled by month-on-month improvements across all sub-indices, primarily driven by seasonal demand. For context, the PMI values were 56.8 in February and 59 in January, compared to 57.2 in December 2024—highlighting a steady upward trend.
Key drivers behind this robust performance were manufacturers in the food & beverages and textile and apparel sectors. These industries led strong increases in both New Orders and Production, underlining their responsiveness to heightened consumer demand. Additionally, increases in Employment and Stock of Purchases reflected firms’ proactive measures to meet production needs.
However, not all indicators were entirely positive. Suppliers’ Delivery Time continued to lengthen, suggesting that supplier networks are under mounting pressure due to the surge in demand.
Despite logistical challenges, the outlook for manufacturing remains optimistic over the next three months. That said, the Central Bank of Sri Lanka (CBSL) noted concerns among export-oriented firms regarding ongoing global trade uncertainties.
The Services PMI also recorded strong growth, reaching 69.8 in March—up from 56.5 in February and 58.5 in January. While slightly below December’s 71.1, this still indicates robust expansion, particularly during the festive period.
Several sectors contributed to this growth. Wholesale and retail trade activities expanded sharply, bolstered by seasonal shopping trends. Financial services also performed well, aided by increased lending, while sectors such as professional services, personal care, insurance, and hospitality reported notable gains.
New business generation was on the rise, especially in finance, retail, insurance, and hospitality-related services. Reflecting this, many firms increased hiring to support the seasonal surge, which in turn contributed to improved employment figures.
Meanwhile, backlogs of work continued to decline, though the rate of reduction was slower in March—possibly indicating a balance between improved operational capacity and sustained demand.
Looking ahead, business sentiment remains generally positive, although expectations are slightly tempered by concerns over US-imposed import tariffs and their potential ripple effects on local service providers and exporters.
In summary, March 2025 was a standout month for Sri Lanka’s economy, characterized by a resurgence in manufacturing and services, underscored by seasonal demand and cautious optimism for the quarter ahead.
