Sri Lanka Manufacturing and Services sectors expand in July 2020

(COLOMBO, LANKAPUVATH) –Purchasing Managers’ Indices for both Manufacturing and Services activities continued to expand in July 2020, compared to June 2020 benefitting from the normalizing of economic activities, the Central Bank said Monday.

Reflecting that manufacturing activities are gradually approaching the pre-COVID levels with the normalization of business activities, the Manufacturing PMI continued to expand in July 2020 recording 64.6 mainly due to the expansion in New Orders and Production sub-indices.

The New Orders and Production sub-indices expanded, yet at a slower rate, benefitting from new orders received in July 2020. Meanwhile, Employment remained expanded in line with these developments.

The Stock of purchases expanded at a higher rate due to intended accumulation of stocks for future productions, anticipating higher demand with the normalization of economic activities.

Respondents highlighted that the restrictions imposed on importation of certain categories of goods adversely affected some manufacturing activities.

The overall expectations for manufacturing activities for the next three months improved, yet the manufacturers are still concerned that the subdued external demand due to the COVID-19 pandemic would continue to exert pressure on their business activities.

Services sector continued to expand for the second consecutive month with PMI reaching 51.4 in July 2020. This was underpinned by the expansions observed in New Businesses, Business Activities and Expectations for Activity compared to June 2020 indicating a further recovery in the services sector, which was affected by COVID-19 pandemic.

New Businesses, particularly in financial services and insurance subsectors, improved in July 2020 with the gradual recovery in economic activities.

Business Activities in most of the sub sectors expanded during the month indicating a broad-based recovery in service activities. With the rise in financial facilities granted, business activities in financial services sub-sector improved in July 2020 compared to the previous month. Further, accommodation, food and beverage sub-sector also recorded an improvement over the last month in line with the improvements in domestic tourism. Moreover, business activities related to wholesale and retail trade, health services and telecommunication sub-sectors also increased during the month.

However, respondents, particularly in cargo handling and import trade, were concerned about restrictions imposed on non-essential items.

Employment continued to decline in July 2020 for the sixth consecutive month owing to halt in new recruitments.

Further, Backlogs of Work declined in July 2020 since most of the firms are operating under usual working environment.

Meanwhile, Expectations on Future Business Activities increased in July 2020 with the positive sentiments on revival of economic activities in the forthcoming period.

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