Coronavirus hits manufacturing and services sectors

Sri Lanka’s manufacturing and service sector activities slowed down in January while new coronavirus (COVID-19) outbreak in China is leading to indefinite delays of supplies for manufacturing and slowdown in future expectations in tourism and transport sectors, according to the Central Bank’s SL Purchasing Managers’ Index (PMI).

Manufacturing activities recorded a PMI index value of 54, down from 54.3 index points in December, mainly due to the slower expansion in new orders, production and stock of purchases in the manufacturing of food and beverages sector with the decreasing demand after the festive season. The suppliers’ delivery time rose significantly in the month by 11.5 index points to 61.5 compared to December 2019.

“Although, lengthening of suppliers’ delivery time usually indicates higher demand for materials with the expanding manufacturing activities, the new coronavirus (COVID-19) outbreak in China since early January 2020 has mainly caused this delay.

“Further, many respondents in this sector highlighted that their import orders for materials from China have been delayed indefinitely due to the same reason,” the Central Bank said.  Although manufactures, especially in the appeal sector, have cautioned that the new coronavirus outbreak would disrupt the global supply chain, overall expectations for manufacturing activities for the next three months remained slightly improved compared to December.

Meanwhile, services PMI recorded an index value of 57, which was 3.2 index points down from December 2019 following the seasonally high activity level prevailed in December 2019. However, Central Bank said the coronavirus outbreak overshadows future expectations in tourism and transport sectors.  “Business activities in accommodation, food and beverage and telecommunication sub sectors expanded due to peak tourism season and tax reductions introduced by the government, respectively.

“Further, business activities in financial services, transportation, and wholesale and retail trade sub sectors also recorded a growth in January 2020,” the Central Bank said. In particular, employment increased in January following the continuous decline for nine consecutive months due to new recruitments at the beginning of the year.

The increase in employment also contributed towards the decline in backlogs of work in January 2020.

However, increase in expectations for activity in accommodation, food and beverage and transportation sub sectors sharply slowed down in January 2020 due to the impact of new coronavirus outbreak, which would lead to a decline in arrival of tourists and shipments from China.