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Inflation in September 2016

Inflation, as measured by the change in the National Consumer Price Index (NCPI) (2013=100), which is compiled by the Department of Census and Statistics, increased to 4.7 per cent in September 2016 from 4.5 per cent in August 2016, on year-on-year basis. Both Food and Non-food categories contributed towards the year-on-year inflation in September 2016.

The change in the NCPI measured on an annual average basis increased to 3.8 per cent in September 2016 from 3.6 per cent in August 2016.

Central Bank Resolves Four Insolvent Financial Institutions to Protect Depositors and Promote the Financial System Stability

As announced to the public on 10.10.2016, the Monetary Board at its meeting held on 14.10.2016 considered resolution issues pertaining to a number of non-bank financial institutions in the context of relevant legal provisions in the interest of protecting the public trust in the financial system. Accordingly, the Monetary Board approved a resolution mechanism for repayment of depositors of three finance companies and legitimate investors in government securities-linked investments in Entrust Securities PLC.

External Sector Performance - July 2016

The external sector performance improved in July 2016 with a reduction of the trade deficit, increased tourist earnings and higher inflows to the financial account. The trade deficit contracted in July, due to the reduction in imports which outweighed the reduction in exports. Tourist earnings increased while workers’ remittances declined during the month compared to the corresponding period of the previous year. Inflows to the financial account strengthened with the proceeds of US dollars 1,500 million from the issuance of the 10th international sovereign bond, US dollars 300 million from the Syndicated Loan facility and net inflows recorded in the government securities market and the Colombo Stock Exchange (CSE), easing the pressure on the Balance of Payments.

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SL Purchasing Managers’ Index Survey - September 2016

The Manufacturing Sector PMI was 57.7 in September which is an increase of 4.2 index points from 53.5 in August 2016. The increase in September was fuelled by the improvements observed in New Orders and Production sub-indices. The New Orders and Production sub-indices of manufacturing sector PMI increased compared to the previous month while the Stock of Purchases index remained unchanged. However, the Employment and Suppliers’ Delivery time sub-indices decreased compared to the previous month. Overall data points to an expansion where all the sub-indices apart from Suppliers’ Delivery Time index which is neutral, are above the 50.0 threshold. The expectations for activities indicate an improvement for the next three months.

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