ECONOMYNEXT – Sri Lanka’s manufacturing has recovered strongly in October 2021 to a seven month high with local orders in food and beverages, exports in textile, a Purchasing Managers’ Index showed.
The central bank said this increase was due to the upcoming festival season in December.
“Indicating a strong revival in manufacturing activities in the country, the manufacturing PMI reached a 7-month high at 60.4 in October 2021 with an increase of 6.1 index points compared to the previous month,” the central bank which compiles the index said.
“Many respondents from the manufacture of food & beverages sector mentioned that they secured more local orders in October 2021, targeting demand in the upcoming festive season, while textile and apparel manufacturers have received healthy export orders.”
The increase in new orders and production, particularly in the manufacture of food and beverages and textiles and apparel sectors, have contributed considerably to the overall improvement in the PMI.
Employment has also increased during the month compared to the previous month with the relaxation of travel restrictions in the country.
“However, some respondents in the textile and wearing apparel sector highlighted that their production levels could be even higher if sufficient employees were available,” the central bank said.
In October Suppliers’ Delivery Time had lengthened at a higher rate in October 2021, the central bank said.
Manufacturers have said their stock purchase increased with the improvement in new orders and anticipation of the normalisation of economic activities.
While some food and beverages sector manufacturers have said they increased purchases due to supply-side concerns.
“The continuous increase in the cost of imported raw materials, mainly due to rising global commodity prices, has been highlighted as a major concern by most of the respondents in all sub-sectors,” the central bank said.
The Services PMI has recorded 57.9 in October 2021 from 52.2 in September, though retail and wholesale trade was hit from lockdowns.
“This was underpinned by the increases in New Businesses, Business Activities and Expectations for Activity sub-indices.
“New Businesses increased in October compared to the previous month mainly with the improvements observed in financial services, transportation, education, insurance, professional services, real estate and telecommunication sub-sectors.
The central bank said business activities saw a sharp increase in October with significant improvements in financial services, other personal activities, transportation, education and wholesale and retail trade subsectors.
“Nevertheless, some respondents were pessimistic over the negative consequences on their business activities from increasing input costs, and supply constraints and delays amidst import related issues,” the central bank said.
“Further, respondents in freight forwarding companies also expressed their concerns over the adverse impact on export volumes due to capacity limitations and increasing freight charges.”