The Sri Lanka services PMI recorded a sharp expansion in December 2025 as festive-season demand lifted wholesale and retail trade, helping the sector overcome early-month disruptions caused by Cyclone Ditwah.
Sri Lanka services PMI signals strong December expansion despite cyclone impact
Sri Lanka’s services sector closed 2025 on a strong note, with business activity expanding at a rapid pace in December, according to the latest Purchasing Managers’ Index released by the Central Bank of Sri Lanka. The index rose to 67.9, firmly above the neutral 50 threshold, indicating broad-based growth despite weather-related challenges at the start of the month.
The central bank attributed the expansion primarily to heightened wholesale and retail trade activity, driven by increased consumer spending during the festive season. Seasonal demand provided a decisive boost to services output, offsetting temporary disruptions caused by Cyclone Ditwah, which affected operations in several regions during early December.
Beyond trade, other personal service activities also recorded improved momentum, reflecting stronger consumer confidence and increased discretionary spending toward the year end. Accommodation, food, and beverage service providers likewise reported higher levels of activity, supported by domestic travel and social events typically associated with the holiday period. Together, these segments reinforced the positive trajectory of the services sector.
The Sri Lanka services PMI also reflected a notable pickup in new business inflows. The sub-index for new business rose to 64.6 in December, up sharply from 53.6 in November. According to the central bank, this improvement was underpinned by stronger wholesale and retail activity, alongside renewed momentum in financial services. The data suggest that demand conditions improved meaningfully as businesses and households accelerated spending before the year’s close.
Employment conditions strengthened in tandem with higher activity levels. Firms expanded their workforces during December to meet increased operational requirements, particularly in customer-facing and logistics-related services. This rise in employment points to growing confidence among service providers about near-term demand and business continuity heading into 2026.
Backlogs of work increased for the second consecutive month, indicating that demand growth outpaced firms’ immediate capacity. While rising backlogs can place short-term pressure on operational efficiency, they also signal sustained order volumes that may support continued hiring and investment if demand remains stable.
The December PMI reading highlights the resilience of Sri Lanka’s services sector during a period marked by external disruptions and ongoing macroeconomic adjustment. Weather-related shocks have historically posed risks to short-term output, particularly in services reliant on transport, retail distribution, and tourism-linked activities. However, the latest data indicate that seasonal demand and adaptive business operations helped mitigate these impacts.
From a broader economic perspective, the strong PMI reading aligns with expectations of a gradual recovery in domestic demand as inflation moderates and financial conditions stabilize. The services sector, which accounts for a significant share of Sri Lanka’s economic output and employment, plays a central role in sustaining growth during periods when external demand and investment remain uneven.
Analysts note that sustained expansion in services activity could support improvements in labor market conditions and household incomes, reinforcing consumption-led growth. However, they also caution that maintaining momentum will depend on continued policy stability, manageable cost pressures, and the absence of major supply-side shocks.
Looking ahead, the elevated PMI level suggests that services activity entered 2026 with solid underlying demand. If wholesale and retail trade continues to benefit from improving consumer sentiment, and if financial and personal services maintain their current trajectory, the sector could remain a key contributor to overall economic expansion in the coming quarters.
Nevertheless, observers emphasize the importance of monitoring employment sustainability and backlog trends to ensure that capacity constraints do not translate into service bottlenecks or rising operating costs. For now, the December PMI data present a cautiously optimistic outlook, highlighting the sector’s ability to absorb shocks while responding quickly to shifts in demand.