Central Bank of Sri Lanka : SL Purchasing Managers’ Index (PMI) - December 2019

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Press Release

Issued By Statistics Department

Date	16 January 2020

SL Purchasing Managers' Index (PMI) - December 2019

Manufacturing PMI expanded at a slower pace in December 2019 recording an index value of 54.3 mainly due to the slower expansion in New Orders, Production and Stock of Purchases.

All the sub-indices indicated an expansion, yet at a slower pace, compared to November 2019. New Orders and Production expanded at a slower rate owing to the slowdown in manufacturing of textile and wearing apparel sector. A significant slowdown in employment was experienced, particularly in manufacturing of wearing apparel sector as potential employees were attracted to seasonal jobs for better remuneration. This slowdown in employment partly impacted the slowdown in production.

Although the New Orders and Production expanded at a slower pace, the Stock of purchases expanded at a higher rate due to intended accumulation of stocks in December 2019 to fulfil the future requirements, anticipating supply disruptions, due to upcoming Chinese new year holidays. Further, Suppliers' Delivery Time remained at the neutral level indicating that it remains as same as in the previous month.

	Variable		Nov.		Dec.		+/-		Summary

PMI	56.0	54.3	-	Rising, Slower Rate
	Sub-Indices of PMI

	New Orders		57.1		56.5		-		Rising, Slower Rate
	Production		57.1		56.0		-		Rising, Slower Rate
	Employment		57.7		51.0		-		Rising, Slower Rate
	Stock of Purchases		55.6		56.5		+		Rising, Higher Rate
	Suppliers' Delivery Time		50.0		50.0		=		Remained at Neutral

Source: Central Bank of Sri Lanka

All sub-indices of PMI Manufacturing, except Suppliers' Delivery Time which was on neutral level, exceeded the threshold of 50.0 (neutral) signalling an overall expansion in manufacturing activities during the month of December 2019.

		PMI		Decrease of
		Index Value		1.7 index points
	54.3		compared to
		November 2019
		PMI - Manufacturing
100
		Increasing rate of growth
54.3	53.7	56.0	54.3
50
		Increasing rate of contraction
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov	Dec	Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov	Dec
	2018		2019

Source: Central Bank of Sri Lanka

The World Outlook:

Manufacturing PMI

The global manufacturing PMI recorded a value of 50.1 in December 2019 with a decrease of 0.2 index points fromNovember 2019.

Manufacturing PMIs of UK, Eurozone, China and USA slowed down in December 2019 while those of India, Singapore andRussia improved.

Source: Markit1 as at 16th January 2020

1 Markit is a leading global diversified provider of financial information services. It is identified as the global PMI compiler and compiles PMIs for over 30 countries and for key regions including theEurozone.

Services PMI reached a 24-month high to 60.2 index points in

December 2019, supported by the strong expansion in New Businesses and Business Activity in December 2019 due to the seasonal movement, political stability and measures taken by the government to improve economic activity.

Business Activities in wholesale & retail trade and accommodation, food & beverage sub sectors posted a strong growth due to the festive season and peak season of tourism. Transportation of goods recorded a growth with increased transhipment volumes while other personal services such as leisure activities also improved with the holiday season.

Expectations for Activity increased, yet at a slower pace, compared to the previous month. Respondents cited that they expect a higher growth in their business underpinned by new tax revisions.

Despite the strong growth in Business Activities, the rate of job creation slowed in many sectors in December 2019 due to the delays in filling vacant positions. Further, this is the ninth consecutive month that the index on Employment of the Services sector continued to remain below 50.0 index points (threshold level). Backlogs of Work sub index reached the threshold level indicating that there is no change in backlogs compared to November 2019.

	Variable		Nov.		Dec.		+/-		Summary
	PMI		57.4		60.2		+		Rising, Higher rate
			Sub-Indices of PMI
	New Businesses		52.2		63.0		+		Rising, Higher rate
	Business Activity		59.0		67.8		+		Rising, Higher rate
	Employment			47.0		-
		49.4				Falling, Higher rate
	Backlogs of Work		48.1		50.0		+		Neutral from Falling
	Expectations for Activity			73.3		-
		78.1				Rising, Slower Rate

Source: Central Bank of Sri Lanka

PMI	Increase of 2.8
Index Value	index points
60.2	compared to
November 2019

PMI - Services

100
			Increasing rate of growth
52.6	54.7		57.4	60.2
50
			Increasing rate of contraction
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov	Dec	Jan Feb	Mar Apr May Jun Jul Aug Sep Oct Nov	Dec
	2018			2019

Source: Central Bank of Sri Lanka

The World Outlook:

Services PMI

Global services PMI increased to 52.1 in December 2019 from 51.6 in November 2019.

Services PMIs of India, China and US indicated that their services sectors improved in December 2019 compared to November 2019, while Japan indicated a decline in services activities.

(Source: Markit1 as at 16th January 2020)

Technical Note

The Index

PMI is calculated as a 'Diffusion Index', where it takes values between 0 and 100.

PMI=50 - sector remained neutral on month-on-month basis; PMI>50 - sector is generally expanding on month-on-month basis PMI<50 - sector is generally declining on month-on-month basis

Sample

The sampling frame was based on a list of large companies located in the Western province obtained from the EPF Department. Samples for Manufacturing and Services activities were selected based on the GDP sectoral share, with a minimum target of 100 responses for each.

Definitions of Variables
Employment	: Number of staff working for the organization
Stock of purchases	: Raw materials purchased and kept in a warehouse to be used for production
Supplier Delivery Time	: Time lag between order placement and delivery by the supplier
Backlogs of Work	: Uncompleted orders due to increased flow of business activity
Other variables are self-explanatory.