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Manufacturing and service sectors rebound strongly

Manufacturing and service activities have rebounded strongly in December 2020 as Sri Lanka emerged in a new normal situation even after the second wave of the Covid-19 crisis, the Central Bank announced.

This was mainly attributable to the increases observed in production, new orders, employment, and stock of purchase in the manufacturing sector while services also continued to recover led by the expansions observed in new businesses, business activities, backlogs of work and expectations for activity.

The Purchasing Managers Index compiled by the Central Bank showed that the employment sub sector has also increased during the month of December 2020.

Some respondents in the manufacture of food and beverages, textiles and wearing apparel sectors highlighted that they could better utilise employees amidst improved factory operations with increased demand.

The Stock of Purchases sub-index increased significantly in line with the expansion in New Orders and Production, as well as with the intended accumulation of stocks anticipating supply chain disruptions in coming months, particularly due to upcoming Chinese New Year holidays.

Many manufacturers mentioned that their shipments were rescheduled, causing considerable delays in arrival/clearance of required materials, mainly due to the continuous delays at the Port of Colombo.

Expectations for manufacturing activities in the next three months improved further with the expectation for the normalisation of economic activities within the country as well as in major export markets.

Business activities in the services sector increased in December 2020 after declining for two consecutive months.

 
Accommodation, food and beverage sub-sector saw an improvement during the month mainly due to the growth in domestic tourism during the holiday season.


Further, business activities in transportation, and wholesale and retail trade sub-sectors expanded owing to relaxation of travel restrictions to some extent during December 2020.

Moreover, financial services and other personal services sub-sectors also experienced an increase in activities in December 2020.

However, respondents in freight forwarding and import trade cited their concerns over import restrictions. Employment sub-index increased reflecting a moderation of decline in employment in December 2020 since some firms have started to hire new employees in line with the rise in business activities.
 

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