Business activities affected by uncertain political environment

Manufacturing activities expanded at a slower rate in September 2019, recording an index value of 54.7 which is a decrease of 1.9 index points, compared to August 2019, according to the Central Bank’s SL Purchasing Managers’ Index (PMI) – September 2019.

This slowdown in manufacturing PMI was mainly driven by the slowdown in production and new orders during the month of September. Slowdown in production could be observed, especially in manufacturing of food and beverages, and textiles and wearing apparel sectors.

Although the new orders and production expanded at a slower rate, the stock of purchases increased significantly with the anticipation of high demand in future especially in manufacturing of food and beverages sector, the report said this week.

An improvement in employment was observed with the recruitment of new employees to fill the vacancies. Further, suppliers' delivery time slowed down to the neutral level indicating that they experienced similar delivery time as previous month. All sub-indices of PMI Manufacturing, except suppliers’ delivery time, which was on neutral level, exceeded the threshold of 50 (neutral) signalling an overall expansion in manufacturing activities during the period under review.

The services sector continued to expand in September 2019, yet at a slower pace compared to August 2019, mainly due to slower expansion in business activities. Despite the slower expansion in business activities, new businesses exhibited an accelerated pace of growth in September 2019, which could positively contribute towards the growth of business activities in future.

Accommodation, food and beverage services; financial services; and transportation sub sectors contributed towards the growth in new businesses. Meanwhile, expectations for activity remained at the same level in September compared to August 2019.

“However, some respondents highlighted that their optimistic expectations on business activities were affected by the uncertainty in business environment due to current political climate of the country,” the report said.

Employment continued to decline for the sixth consecutive month in September 2019, due to delays in filling vacant positions since recruitments are not carried out in the later part of the year and skill mismatch in the labour force. The backlogs of work sub index remained below 50 threshold level implying that any increase in demand could be met with the existing capacity of service providers.