Sri Lanka’s services sector expands at a higher rate than manufacturing sector in December 2017

Sri Lanka’s services sector expanded at a higher rate than the manufacturing sector in December 2017 although both sectors showed progress compared to the previous month, the Central Bank’s Purchasing Managers’ Index (PMI) Survey released for the month showed.

According to the survey, the Manufacturing PMI increased marginally by 0.3 index points to 59.1 in December 2017 from the previous month while the Services Sector PMI increased significantly by 3.8 points to 61.2 in the month from 57.4 in November.

Manufacturing activities expanded at a higher pace in December compared to November 2017 mainly due to the increase in the Production sub-index.

Stock of Purchases and Employment sub-indices also expanded at a higher pace while New Orders sub-index expanded, albeit at a slower rate, during the month as compared to November 2017. Meanwhile, the Suppliers’ Delivery Time sub-index lengthened at a higher rate compared to previous month.

Overall, all the sub-indices of PMI recorded values above the neutral 50.0 thresholds signaling an overall expansion in December 2017. An improvement in the activities is expected for the next three months.

The Services sector activities expanded at a higher rate in December 2017 supported by all sub-indices namely New Businesses, Business Activity, Employment, Backlogs of Work and Expectations for Activity.

This is the first time that Backlogs of Work sub-index increased beyond the 50.0 thresholds since the survey began in May 2015. New Businesses reached a six-month high, indicating further growth momentum in the Services sector.

The expansion in Business Activity was mainly observed in wholesale and retail trade; and accommodation, food, and beverage service sub-sectors, reasons being increased demand in festival season and increase in both local and foreign tourism.

Prices Charged increased at a higher rate in December compared to November 2017 due to increased demand in festival season. Expected Labour Cost increased in December 2017 due to encashment of unutilized leave for 2017 and expected salary increments in 2018 under collective agreements.


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