Sri Lanka's manufacturing and services sectors expand

The Purchasing Managers’ Indices (PMI) indicate expansions across both manufacturing and services activities for March 2026. The manufacturing sector saw its index rise to 66.7, a significant increase from 56.8 in February, largely fueled by seasonal demand. Services activities also grew, reaching an index value of 59.4 compared to 54.4 the previous month.

Manufacturing sector performance

Seasonal demand drove the expansion of new orders and production, particularly in the food, beverage, textile, and apparel sectors. The stock of purchases index grew as firms increased production, with some companies stocking raw materials as a precaution against potential disruptions from the Middle East conflict. Despite the growth, several challenges impacted the sector:

• Production constraints: Respondents cited a tight environment due to shortages of fuel and raw materials, rising costs, and logistical issues.


• Delivery delays: Suppliers' delivery times lengthened at a higher rate due to shipping disruptions and increased demand.


• Employment: The employment sub-index continued to grow, though at a slower pace than in February.

Services sector performance

The expansion in services was broad-based, with the financial services sector acting as the primary driver due to increased lending. Other key performance highlights include:

• Festive demand: Wholesale and retail trade expanded due to seasonal trends, while insurance and pension funding also showed significant growth.


• Job growth: Firms increased their workforce to meet rising consumer demand ahead of the festive season.


• Workload: Backlogs of work continued to decline, though the pace of this contraction moderated during March.

Global outlook and expectations

While the outlook for the next quarter remains robust due to seasonal opportunities, uncertainties regarding the Middle East conflict and global economic conditions pose potential downside risks. Manufacturing expectations remained above the neutral threshold but showed some moderation due to these geopolitical tensions. On a global scale, Sri Lanka's rising manufacturing and services trends contrast with some international markets, such as the UK's services sector, which showed a falling trend in March.