Manufacturing, services PMI expands in March as Sri Lanka’s economic activity gained momentum across key sectors, supported by seasonal demand, while businesses remain cautious amid external uncertainties and supply-side constraints.
Manufacturing, services PMI expands in March despite global risks
Sri Lanka’s manufacturing and services sectors recorded stronger expansion in March 2026, according to the latest Purchasing Managers’ Index (PMI) released by the Central Bank of Sri Lanka (CBSL). The data indicates a broad-based improvement in business activity, reflecting both cyclical demand factors and gradual economic recovery trends.
The Manufacturing PMI rose sharply to 66.7 in March from 56.8 in February, signalling an accelerated pace of expansion. The CBSL attributed this growth largely to increased seasonal demand, particularly in industries such as food and beverages and textile and wearing apparel. These sectors recorded notable improvements in new orders and production, with the respective sub-indices rising to 69.9 from 55 in the previous month. This upward trend highlights the resilience of Sri Lanka manufacturing sector growth, even as firms navigate operational challenges.
Despite the positive momentum, manufacturers reported a tight production environment, driven by raw material shortages, rising fuel costs, and logistical disruptions. These constraints have continued to exert pressure on supply chains, with many firms adopting precautionary measures such as increased inventory stocking to mitigate potential disruptions. The ongoing Middle East conflict has further heightened these concerns, particularly in relation to shipping delays and energy price volatility.
Employment within the manufacturing sector also expanded, albeit at a slower pace, reflecting cautious workforce adjustments by firms. Meanwhile, suppliers’ delivery times continued to lengthen, indicating persistent bottlenecks in procurement and distribution processes. These challenges underscore the complexity of sustaining growth in a constrained operating environment.
The outlook for the manufacturing sector over the next three months remains positive, with expectations staying above the neutral threshold. However, the CBSL noted that uncertainty linked to global geopolitical developments could moderate growth prospects. The Manufacturing, services PMI expands in March narrative is therefore balanced by underlying risks that could influence future performance.
In parallel, the services sector also demonstrated robust growth, with the Services PMI increasing to 59.4 in March from 54.4 in February. This expansion was driven by improvements across multiple segments, reflecting stronger consumer activity and increased business confidence. The Sri Lanka services sector outlook appears encouraging, supported by rising demand in financial services, wholesale and retail trade, and professional services.
The financial services sector emerged as a key driver of growth, benefiting from increased lending activity and improved financial conditions. Wholesale and retail trade also recorded gains, largely due to festive season demand, while professional and personal services contributed to the overall expansion. This broad-based growth indicates a strengthening of domestic economic activity.
New business activity in the services sector continued to expand, with the index rising to 57.6 from 53.8 in February. This growth was primarily supported by financial services, along with notable contributions from insurance and pension-related activities. The increase in new business suggests improving market conditions and a gradual recovery in consumer and business confidence.
Employment levels in the services sector also increased, as firms expanded their workforce to meet rising demand. At the same time, backlogs of work continued to decline, although at a slower pace, indicating that firms are gradually catching up with previously accumulated workloads.
Looking ahead, expectations for services sector activity over the next quarter remain strong. Businesses anticipate continued support from seasonal demand and emerging opportunities, even as they remain mindful of potential downside risks. The Manufacturing, services PMI expands in March trend reflects a broader recovery trajectory, though it remains sensitive to external shocks.
The CBSL highlighted that ongoing geopolitical tensions, particularly in the Middle East, pose risks to both manufacturing and services sectors. These include potential disruptions to supply chains, increased energy costs, and uncertainties in global trade flows. Such factors could impact business sentiment and operational efficiency in the coming months.
Overall, the March PMI data presents a cautiously optimistic picture of Sri Lanka’s economic landscape. While both manufacturing and services sectors are expanding at a healthy pace, the sustainability of this growth will depend on the ability to manage external risks and address domestic constraints.
As Sri Lanka continues its recovery journey, maintaining momentum in key sectors will be critical. The Manufacturing, services PMI expands in March signals a positive direction, but also underscores the importance of resilience and adaptability in navigating an increasingly uncertain global environment.