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Sri Lanka PMI: manufacturing, services up August 2020 with Covid-19 control

ECONOMYNEXT – A Purchasing Mangers’ Index for July 2020 showed Sri Lanka’s manufacturing and services continuing a recovery seen in June with industries beginning new hires, with the island controlling Coronavirus and providing an environment for people work and move.

The PMI value in August was calculated at above 50 as 57.9 though a little lower than 64.6 in July.

“Recovery of manufacturing activities continued in August 2020 as reflected by PMI, benefitting from the normalisation of business activities in the country,” Sri Lanka’s central bank which compiles the index said in a statement.

“The expansion of manufacturing activities was mainly supported by the manufacturing of food & beverages sector. Some respondents in the sector highlighted that they have recruited new employees with the anticipation of upcoming seasonal demand.”

The employment sub-index in manufacturing was at 54.0 from 51.6 in July.

But manufacturers have said they had problems with running machinery with import controls.

They had complained that “continuation of restrictions imposed on importation of certain categories of goods including machinery parts adversely affected the smooth functioning of manufacturing activities.”

Sri Lanka slapped severe import control not seen since the collapse of the Bretton Woods system in 1971 after the rupee fell in March and April 2020 amid money printing.

In Sri Lanka there is a strong Mercantilist belief that trade (imports) rather than money and credit is a cause of monetary instability in the form of forex shortages and balance of payments trouble.

Services expanded at a faster rate showing a PMI of 56 points in August from 51.4 in July.

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“New Businesses, particularly in financial services, insurance and transportation sub-sectors, improved in August 2020 with the gradual recovery in economic activities,” the statement said.

“Further, respondents in the accommodation, food and beverage sub-sector cited that they were able to attract more domestic tourists through promotions in August 2020.

“Moreover, business activities related to financial services and other personal services sub-sectors also increased during the month.”

Employment in services had fallen with contracts not being extended.

The employment sub-index was below 50 at 38.2 in August, lower than 40 in July.

Sri Lanka is a global leader in the Control of Coronavirus and domestic activities are largely normal and exports though external demand continues to be weak except in some sectors. (Colombo/Sept16/2020)