The Manufacturing Sector PMI decreased to 57.2 index points in July 2018 from 57.6 index points observed in the previous month. The marginal slowdown observed in manufacturing activities in July was mainly driven by slowdown in employment due to the difficulties in replacing unskilled employees to account for high labour turnover especially in the Food and Beverages, and Textiles and Apparel sectors. Moreover, new orders in July 2018 slightly slowed down. However, production and stock of purchases show some improvement, especially in manufacturing of chemicals and pharmaceutical products with the expected positive outlook for the next three months. Meanwhile, lengthening of suppliers’ delivery time usually indicates that economy is booming with expanding activities in the short run. However, in this instance, suppliers’ delivery time lengthened due to scarcity of raw materials in the world market and unfavourable weather conditions. Thus, it does not indicate an expansion in economic activities.

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 02 August 2018, decided to maintain policy interest rates at their current levels. Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank will remain at 7.25 per cent and 8.50 per cent, respectively. The Board’s decision is consistent with its aim of stabilising inflation at mid-single digit levels in the medium term, thereby contributing to a high and sustainable growth trajectory of the Sri Lankan economy. In arriving at its decision, the Board carefully considered the current and expected domestic and global economic developments.