Sri Lanka’s construction industry appears to be showing initial signs of recovery, according to the January 2024 Purchasing Managers’ Index (PMI) for Construction. The Total Activity Index, a key indicator of overall activity, surpassed the neutral threshold of 50 for the first time since January 2022, registering an index value of 52.9.
This positive development suggests a gradual increase in construction activity, with respondents reporting the availability of new projects and the resumption of some previously suspended ones, albeit on a limited scale.
Furthermore, the New Orders sub-index rose compared to the previous month, indicating a potential rise in future construction activity. Respondents attributed this increase to the availability of both foreign-funded and privately-funded projects within the local market.
However, despite these positive indicators, the industry continues to face challenges related to employment. While the rate of job losses has slowed down compared to previous months, the Employment sub-index remains in contractionary territory.
The rising cost of materials also presents a significant obstacle for the industry. Many respondents attributed this increase to recent amendments made to the Value Added Tax (VAT). Despite this challenge, the Quantity of Purchases sub-index rebounded in January, suggesting a potential increase in construction activity in the coming months.
Overall, the January PMI report offers cautiously optimistic news for the Sri Lankan construction sector. While challenges remain, the initial signs of recovery in key areas present a positive outlook for the industry’s future. It will be crucial to monitor future PMI reports to assess the sustainability of this positive trend and the industry’s ability to overcome its ongoing challenges.