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SL services see upturn in Dec 22 while, manufacturing continues set back

Sri Lanka’s services sector returned to growth territory in December 2022 with better availability of fuel while a fall in manufacturing slowed, according to a Purchasing Managers’ Index compiled by the central bank.

Manufacturing PMI recorded an index value of 44.8 in December, indicating a continued setback in manufacturing activities. This setback was driven by subdued performance observed in all the sub-indices, except Suppliers’ Delivery Time.

The decline in New Orders and Production was mainly driven by manufacturing of textile & wearing apparel sector. Subdued foreign demand due to seasonal holidays, and economic slowdown experienced in major export destinations was the main reasons for this decline.

Manufacturers mentioned that, although supply-side impediments such as high input cost and shortage of foreign exchange that affected importation of raw materials are yet to be resolved, demand slowdown due to deteriorated purchasing power of the customers was the key issue that restricted them fromincreazing production.

Furthermore, Employment and Stock of Purchases also declined in line with the decline in New Orders and Production. Meanwhile, Suppliers’ Delivery Time lengthened in December 2022 compared to the previous month on a month-on month basis.

Expectations for manufacturing activities for the next three months indicated an improvement in December 2022 anticipating improvements in economic conditions.

In December 2022, Purchasing Managers Indices indicated an expansion in Services activities and a continued setback in manufacturing activities.

Services PMI returned to the growth territory, recording an index value of 51.6 in December 2022 after declining for two consecutive months. This increase was underpinned by the improvements observed in New Businesses, Business Activities and Expectations for Activity sub-sectors.

However, Employment and Backlogs of Work continued to decline during the month.New Businesses improved at a slower pace in December 2022 compared to November 2022, particularly with the increases observed in other personal activities, accommodation, food and beverages, and insurance sub-sectors.

Business Activities in the services sector continued its upward trend in December 2022. In line with the increase in tourist arrivals during the month, business activities related to other personal activities and accommodation, food and beverages sub-sectors showed significant improvements.

Further, insurance, telecommunication and financial services sub-sectors also showed some increases compared to the previous month. Nevertheless, business activities related to the wholesale and retail trade sub-sector deteriorated further during the month amid the continued cost of living challenges and shortages of certain items.

Employment declined in December at a slower pace due to seasonal recruitments, though resignations, migrations and retirements continued during the month. Meanwhile, Backlogs of Work also decreased at a slower pace during the month.

Expectations for Business Activities for the next three months continued to improve with optimism regarding further improvements in economic conditions and with the peak of the tourist season. However, some respondents were concerned about the impact of tax increases on demand conditions.

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