ECONOMYNEXT – Sri Lanka’s manufacturing and services activity has started to buckle under as a third wave of Coronavirus spread after New Year holiday celebrations, a Purchasing Managers’ Index compiled by the island’s central bank shows.
Sri Lanka began a lockdown in the last week of May which is continued to June. The lockdown is expected to end in June after a Buddhist festival on June 24.
Central Bank said the expectations for business activities for the next three months weakened further in May 2021 due to the anxiety among businesses about growth prospects with the intensification of COVID-19 pandemic.
The PMI for manufacturing had dropped 2.2 points to 42.1 points in May compared to April 2021, when activity dips due to a traditional New Year holiday.
“The Production, especially in the manufacture of food and beverages and textiles and wearing apparel sectors, declined significantly together with the decline of employment mainly due to the continued increase in absents without informing,” the central bank said.
“Many respondents in those sectors highlighted that their productionplans were largely disrupted due to a significant reduction ofavailability of employees amidst the mobility restrictions imposed in mid-May.
New Orders for manufacturing sector of food and beverages had declined in May with the end of seasonal demand and the resurgence of the pandemic, CBSL said.
“Suppliers’ delivery time further lengthened at a higher pace in May 2021 due to the delays in receiving imported and local supplies.
“Further, many respondents highlighted that elevated freight rates increased the cost of imported raw materials and affected adversely on profit margins.”
Though shipping related issues were gradually easing, freight rates were still high.
The global manufacturing PMI recorded a value of 56.0 in May 2021 with an increase of 0.2 index points from April 2021.
Manufacturing PMIs of UK, USA, Russia, Eurozone and China increased at higher rates while that of India increased at a slower pace in May 2021, Central Bank said.
The Services PMI slipped 5.6 points to 39.5 points from 48.9 in April 2021. Central Bank said this is the lowest record since April 2020.
“New businesses in the services sector declined at a faster pace in May 2021 compared to April 2021 with declines observed in most subsectors,” the central bank said.
However, human health sector activities have improved with the set-up of new COVID-19 treatment facilities.
“Wholesale and retail trade, other personal activities and accommodation, food and beverage, and professional services sub-sectors contributed the most towards the decline in overall business activities.
“Nevertheless, business activities in human health activities, and IT programming consultancy and related activities sub-sectors remained at the same level as in the previous month.
“Employment continued to decline in May 2021 due to retirements, resignations and contract expirations amid the absence of new recruitments.
“Backlogs of work increased in May 2021 with continued localized lockdowns and island wide travel restrictions imposed towards the latter part of the month. (Colombo/June19/2021)