Driven by seasonal demand, Manufacturing PMI turns positive in March

Manufacturing PMI turned positive in March 2023, after nine consecutive survey rounds, recording an index value of 51.4. This month-on-month expansion was driven by the increase in New Orders and Production sub-indices mainly due to the seasonal demand. However, Employment, Stock of Purchases and Suppliers’ Delivery Time sub-indices remained below the neutral threshold.

The increase in New Orders and Production was mainly driven by the manufacture of food & beverages sector, where many respondents mentioned that they experienced a relatively higher demand compared to previous months to cater for the upcoming festive season. However, Employment continued to decline mostly due to non-replacement of retirements and resignations. Further, Stock of Purchases declined in March as well, since some firms used their stocks of raw materials delaying new purchases with the anticipation of a decline in raw material prices in the period ahead. Meanwhile, Suppliers’ Delivery Time was slightly shortened during the month.

Expectations for manufacturing activities for the next three months indicated an improvement with the developments observed in the current economic environment.

Services sector PMI returned to the growth territory, recording an index value of 55.1 in March 2023 indicating an expansion across the services sector. This was driven by the increases observed in New Businesses, Business Activities, and Expectations for Activity. New Businesses increased in March 2023 compared to February 2023, particularly with the increases observed in financial services, insurance and professional services sub-sectors. Business Activities in the services sector rebounded in March 2023 after observing a decline in the previous month.

Accordingly, financial services sub-sector continued to improve with the increases in deposits, while other personal activities sub-sector also exhibited a significant improvement. Meanwhile, human health, insurance, education and professional services sub-sectors also recorded slight increases during the month. However, business activities related to wholesale and retail trade sub-sector continued to deteriorate despite some improvements seen ahead of the festive season. Employment continued to decline in March at a slower pace due to resignations, migrations and retirements occurred during the month despite few new recruitments to accomadate the seasonal demand. Meanwhile, Backlogs of Work also decreased at a slower pace during the month (CBSL)