ECONOMYNEXT – Sri Lanka’s manufacturing and service sectors grew at a slower pace in July 2018 compared to the previous month due to labour constraints, a Purchasing Manager’s Index showed.
The Central Bank published index showed the manufacturing PMI growth slowing to 57.2 points in July from 57.6 points a month earlier. An index value over 50 indicates growth over the previous month.
In manufacturing, the employment sub-index declined to 55 points in July from 58.5 points a month earlier.
“The marginal slowdown observed in manufacturing activities in July was mainly driven by slowdown in employment due to the difficulties in replacing unskilled employees to account for high labour turnover especially in the Food and Beverages, and Textiles and Apparel sectors.” the Central Bank said.
The new orders sub-index too fell to 59.5 points in July from a month earlier.
“However, production and stock of purchases show some improvement, especially in manufacturing of chemicals and pharmaceutical products with the expected positive outlook for the next three months,” the Central Bank said.
It said the suppliers’ delivery time has lengthened. Supply delivery time usually increases due to a boom in an economy, and the expansion of activities in the short-term.
“However, in this instance, suppliers’ delivery time lengthened due to scarcity of raw materials in the world market and unfavourable weather conditions. Thus, it does not indicate an expansion in economic activities.”
The Central Bank said expectations are higher for manufacturing activities for the next three months.
Meanwhile, the services sector PMI declined to 57.8 points in July 2018 from 58.7 points a month ago, indicating a slowdown in growth.
There was faster growth in the New Businesses, Business Activity and Expectations for Activity sub-indices, the Central Bank said.
Growth in new business and business activities were seen in financial services and insurance sectors.
“Respondents cited establishment of digital banking units and improvements to service delivery channels as contributory factors to this growth,” the Central Bank said.
Similar to manufacturing, employment dragged down the service sector PMI as well. The employment sub-index fell to 51.1 points in July from 58.8 points a month earlier.
“Employment levels expanded at a slower rate compared to the strong pace of job creation in the previous two months,” the Central Bank said.
“Service providers’ optimism on the three months business outlook strengthened to a 17-month high, particularly among financial services, accommodation food & beverage, other personal services and transportation sectors.”
The Central Bank said that prices charged of the Services sector grew at a slower rate and recorded a three-month low in July 2018, owing to absence of any unforeseen price hikes during the month.
Expected labour cost in the services sector also increased at a slower rate during July, it said. (COLOMBO, 20 August, 2018)