The Manufacturing Sector PMI decreased to 54.1 index points in September 2018 from 58.2 index points recorded in August 2018. The slowdown observed in manufacturing activities in September was mainly driven by the slowdown in new orders and production, especially in manufacturing of food and beverages activities. Respondents highlighted that they had to increase their prices during the period due to increase in input cost of imported raw materials with rupee depreciation. This led to a decline in demand for their products, which in turn resulted in a decrease in new orders and production. However, new orders and production of manufacturing of textiles, wearing apparel, leather and other related products, which are mostly export oriented improved during this period. Overall employment and stock of purchases also slowed down. Meanwhile, lengthening of suppliers’ delivery time usually indicates that economy is booming with expanding activities in the short run. However, in this instance, lengthening of suppliers’ delivery time was due to manufacturers’ intentional increase of the lead time with the expectation of rupee stabilization. Thus, it does not indicate an expansion in economic activities. Overall, all the sub-indices of PMI recorded values above the neutral 50.0 threshold signalling an overall expansion in September yet at a slower pace compared to August.

The Central Bank of Sri Lanka (CBSL) wishes to make the following statement in relation to the article titled “Government and CB have abdicated vital statutory duty by not being able to deal with rupee depreciation” that appeared in various newspapers on 08th and 09th October 2018.

The Central Bank is statutorily charged with the responsibility of securing, so far as possible by action authorised by the Monetary Law Act (MLA), a) economic and price stability; and b) financial system stability, with a view to encouraging and promoting the development of the productive resources of Sri Lanka. While financial system stability is identified by the resilience of the financial system to internal and external shocks, price stability is generally defined as maintaining low and stable inflation, which leads to economic conditions that support high and sustainable levels of economic growth.