COLOMBO: Rising demand and expectations of stronger sales should sustain growth in Sri Lankan manufacturing in 2017, though labour shortages will need to be addressed to maintain this trajectory. The latest purchasing managers’ index (PMI) released by Sri Lanka’s central bank showed continued expansion in manufacturing, which stood at 56.2 points in January; any PMI reading above 50 indicates growth. Since the central bank began producing monthly PMI data in May 2015, the manufacturing index has been largely positive, dipping into negative territory only in April and May of last year – partly a result of adverse weather conditions – before rebounding strongly.
While January’s figure was down slightly on the 58.3 points posted in December – a dip the central bank attributed to seasonal factors such as realignment of business plans in the new year – results were well up on the same month in 2016, when the index stood at 51.9. All five indices included in the PMI showed positive year-on-year growth. Month-on-month increases were seen on the employment and stock purchases indices, suggesting higher levels of production and new orders could be seen in the near future. “Overall data points to an expansion where all the sub-indices are above the neutral 50 threshold,” the central bank said. “The expectations for activities indicated an improvement for the next three months.”
The IMF is similarly bullish on manufacturing growth. In a December review of its three-year extended fund facility with the Sri Lankan government, the IMF forecast GDP would expand by 6.3% this year, above the 5-5.5% expected in 2016. Manufacturing is seen as a key driver of this growth, and the IMF predicts it will see increases in the coming year along with construction and services.
