Manufacturing activities indicate subdued performance in October 2020 due to adverse impacts of the second wave of COVID-19 pandemic erupted in the country in early October. Accordingly, manufacturing PMI declined to 40.3 in October 2020 with a significant decline in Production, New Orders, Employment, and Stock of Purchases sub-indices, particularly in the manufacturing of wearing apparel and food & beverages sectors.

The Production of all manufacturing sectors declined significantly together with the decline of Employment in October. Many respondents in the manufacturing of food & beverages and textiles & wearing apparel sectors highlighted that their factory operations were largely disrupted due to localized curfew imposed during the month to contain the spread of the pandemic. Further, they mentioned that some employees were reluctant to report to work due to fear of the pandemic while many employers refrain from employing their full workforce following health authority guidelines, causing a significant reduction of availability of employees.

Further, Stock of Purchases sub-index also decreased at a higher pace in line with the decline in Production and New orders, as well as increased uncertainty. The Suppliers’ Delivery Time sub-index lengthened at a higher pace, where many respondents highlighted that they experienced a considerable delay in port/custom clearance.

The sub-index of Expectations for manufacturing activities for the next three months declined significantly due to the ongoing second wave of the spread of the COVID-19 pandemic, particularly in the Western Province.

Meanwhile Services sector PMI declined to 41.8 in October 2020 reflecting the adverse impact of the second wave of COVID-19 pandemic on the services sector of the economy, which was gradually recovering during the past four months from the impact of first wave. This contraction was underpinned by the declines observed in all sub-indices of services PMI except for the index of backlogs of work.

New businesses, particularly in financial services and insurance subsectors, declined in October 2020 compared to the previous month.

Business activities also declined in October 2020 mainly in wholesale and retail trade, transportation, and accommodation, food and beverage sub-sectors with the localized curfew imposed to contain the spread of the second wave of COVID-19 pandemic. Further, business activities related to insurance and educational services subsectors also saw declines during the month. Moreover, 59.3% of the respondents cited that the decline in business activities is attributable to the negative impact of the second wave of COVID-19 pandemic on demand.

As cited by several respondents backlogs of work increased in October 2020 with the disruptions to their business activities due to the absence of employees who are resided in lockdown areas. In addition, reluctance of employees to report to work and unwillingness of employers to employ their full workforce due to the pandemic related issues have also affected the smooth operation of business activities during the month.

Employment declined in October 2020 owing to non-extension of work agreements of the contract employees amidst halt in new recruitments.

Meanwhile, expectations on future business activities also declined in October 2020 due to the pessimism prevailing with country experiencing the second wave of COVID-19 pandemic.