Sri Lanka’s Economic Pulse: Services Surge as Manufacturing Softens in June

Sri Lanka's latest Purchasing Managers' Index (PMI) reading for June 2025 indicates a mixed economic situation with improvement in services while manufacturing eased a bit.

Manufacturing Sector: Slowing Down
The Manufacturing PMI dropped to 51.9 index points in June from 55.5 in May, a sign that the growth was slowing down.
- New orders and production decelerated, reflecting hesitant demand in large industries

- Job levels remained stable, with firms taking precautions in hiring as input costs rose
- Supplier lead times eased modestly, suggesting easing logistics pressures
- Purchase inventories were steady, with even inventory control
Although remaining above the neutral 50 reading, the decline suggests manufacturers are experiencing cost pressures and subdued external demand.

Services Sector: Strong Growth
On the other hand, the Services PMI improved to 61.9 index points in June from 57 in May, showing a steep rise in business activity.
- Financial services dominated, with the support from higher lending and consumer confidence

- Wholesale and retail trade experienced mid-year holiday-influenced seasonals gains

- Hiring picked up, with companies increasing recruitment to keep up with growing demand

- Positive macroeconomic conditions offered promising opportunities for future action

The relative strength of the services sector marks it as a post-crisis pivot of Sri Lanka's rebound, driven by domestic consumption and financial intermediation. Expectation As manufacturing incurs headwinds, the buoyancy of the services sector provides an encouraging counterweight. Policymakers might have to keep a watch on inflationary pressures and international uncertainties to maintain this growth path.

 Sources: Central Bank of Sri Lanka, Trading Economics, FastBull News