Manufacturing growth slows in August amid weaker new orders and production

Sri Lanka’s manufacturing sector continued to expand in August, but the pace of growth slowed amid weaker new orders and production, according to the latest Purchasing Managers’ Index (PMI) released by the Central Bank of Sri Lanka (CBSL).

The Manufacturing PMI fell to 53.0 in August from 55.0 in July, indicating continued expansion, although at a slower rate.

The slowdown was reflected particularly in production and new orders. The New Orders sub-index declined to the neutral level of 50.0, from 55.9 in July, indicating that new business activity remained broadly unchanged during the month.

Meanwhile, the Production sub-index fell to 48.4 from 54.5, moving below the neutral threshold. The Central Bank attributed the decline primarily to weaker production in the textiles and wearing apparel sector.

Despite the moderation in manufacturing activity, employment and purchasing activity increased during August.

The Employment sub-index rose to 54.8 from 51.0, reflecting continued recruitment in the sector, while the Stock of Purchases sub-index increased to 54.8 from 51.5, indicating a gradual build-up of inventories ahead of expected year-end seasonal production.

However, supply-side pressures persisted. The Suppliers’ Delivery Times sub-index increased to 63.0 from 61.5, indicating further lengthening of delivery times amid continued supply disruptions.

The Central Bank said the outlook for manufacturing remained positive despite near-term challenges, with expectations of a year-end seasonal upturn providing support to the sector.

Meanwhile, activity in the services sector accelerated in August. The Services PMI increased to 65.6 from 61.4 in July, supported by stronger activity in transportation, wholesale and retail trade and professional services.

New business activity remained strong in services, while employment also increased during the month. At the same time, backlogs of work declined, reversing the increase recorded in July.

Expectations for services activity over the coming quarter remained positive, supported by anticipated economic improvements and expected growth in tourist arrivals. However, the Central Bank noted that broader global economic uncertainties continued to pose downside risks to the outlook.

The August PMI data therefore point to continued expansion across both sectors, although manufacturing activity faced a more subdued month as new orders and production weakened, according to the CBSL.