Sri Lanka’s services sector delivered another strong performance in June, with the Central Bank of Sri Lanka’s latest Purchasing Managers’ Index (PMI) pointing to accelerating business activity across several industries. Hitherto beneath the encouraging figures, economists caution that global uncertainties continue to cast a shadow over the country’s broader economic recovery.
The Services PMI climbed to 58.5 in June from 56.9 in May, indicating a faster pace of expansion as businesses across financial, insurance and professional services reported stronger activity.
According to the CBSL, financial services emerged as the biggest contributor to growth, supported by expanding professional services and a notable improvement within the insurance sector.
One of the strongest indicators came from new business activity, with the relevant index rising sharply to 62.5 from 58 in May. Financial institutions led this increase, while professional services, insurance companies and other personal service providers also recorded healthy gains.
Employment also strengthened considerably. The Employment sub-index rose to 54 after standing below the expansion threshold at 49.4 during the previous month, indicating that more businesses increased hiring to meet growing demand.
Meanwhile, the Backlogs of Work index stabilised at the neutral level of 50 after declining in May. This suggests that companies have largely managed their pending workloads while continuing to expand operations.
The Central Bank expects the services sector to remain resilient over the next quarter, supported by anticipated economic improvements and a projected increase in tourist arrivals. Officials believe the upcoming Kandy Esala Perahera season will further stimulate business activity, particularly in tourism-related industries, hospitality, transport and retail services.
However, the report also warns that external developments continue to pose significant risks. Ongoing geopolitical tensions, volatile global markets and broader international economic uncertainty could weaken investor confidence and affect sectors closely linked to international trade and tourism.
Despite these challenges, the June PMI paints a largely positive picture of Sri Lanka’s service economy. Stronger business activity, rising employment and increasing customer demand demonstrate growing business confidence. Nevertheless, analysts stress that maintaining this momentum will depend on both domestic economic stability and the country’s ability to navigate an increasingly uncertain global environment over the months ahead.