December, 16, 2020
Manufacturing PMI bounced to 57.6 in November 2020 with an increase of 17.3 index points compared to October 2020, the Central Bank said yesterday (15).
The significant increase in New Orders, particularly in the manufacture of textile & wearing apparel and food & beverages sectors, has mainly contributed to this considerable improvement. Increase in Production sub-index, mainly on account of the manufacture of textile & wearing apparel and non-metallic mineral products sectors, together with lengthening of the Suppliers' Delivery Time across all sectors have also contributed to the overall increase in the Manufacturing PMI.
Some respondents in the manufacture of food & beverages and textiles & wearing apparel sectors highlighted that, although there was a reasonable/satisfactory demand, they were unable to carry out production at the desired capacity due to lower employee availability due to health related concerns.
Despite the higher increase observed in New Orders and Production, the Stock of Purchases remained contracted with a slight edging up, as there were some accumulated stocks available. The Suppliers’ Delivery Time sub-index lengthened at a higher pace, mainly due to ongoing delays at the Port of Colombo where many respondents mentioned that their shipments were either rerouted or refused to accept by the shipping lines.
The sub-index of Expectations for manufacturing activities for the next three months increased significantly with expectation for the normalisation of economic activities within the country as well as in major export markets.
Meanwhile, remaining in the contraction territory, services sector PMI edged up to 48.8 in November 2020, reflecting a slower decline in services sector economic activities in November 2020 compared to the previous month. This deterioration in services sector activities was underpinned by the declines observed in business activities and employment sub-indices of services PMI.
New businesses sub-index increased in November 2020, particularly with the improvements observed in transportation and education sub-sectors.
Business activities sub index also increased during the month indicating a moderation in contraction of service activities. Business activities in financial services and insurance sub-sectors showed an increase in November 2020. However, business activities in wholesale and retail trade, transportation, and accommodation, food and beverage sub-sectors declined with the quarantine curfew imposed in the Western province in early November 2020 and localized isolations effected to contain the spread of the second wave of COVID-19 pandemic. Nevertheless, respondents in freight forwarding cited that an improvement was observed in their business activities due to the increase in apparel and personal protective equipment exports.
Backlogs of work continued to increase in November 2020 with the disruptions to their business activities due to the absence of employees who are resided in lockdown areas.
Employment continued to decline in November 2020 owing to nonextension of work agreements of the contract employees amidst halt in new recruitments.
However, expectations on future business activities increased considerably in November 2020 as service providers were more optimistic on the recovery of economic activities that were affected by the second wave of COVID-19 pandemic.
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