- Future outlook positive though tax revisions and shipping disruptions due to unrest in the Red Sea are cited as downsides
The country’s manufacturing and services sectors in December failed to sustain the strong upturn recorded in November judging by the Purchasing Managers Index (PMI).
The Manufacturing PMI recorded an index value of 52.7 in December 2023, indicating an expansion in manufacturing activities. This improvement was attributable to the increases observed in all the sub-indices except Employment.
In November, manufacturing PMI increased to 57.0 on a month-on-month basis in November 2023, driven by the seasonal factors.
The index exceeded the neutral threshold after March 2023, with a positive contribution from all the sub-indices. In December the services sector PMI recorded an index value of 58.9 indicating an expansion in the services activities. This was led by the increases observed in new businesses, business activities and expectations for activity.
However in November the services sector PMI recorded an index value of 59.4 indicating an accelerated expansion in the services activities. This was led by the increases observed in new businesses, business activities, employment and expectations for activity.
Compiler of the indices, the Central Bank referring to December PMI said the increases in new orders and production were driven by the manufacture of food and beverages sector with the seasonal demand.
However, new orders and production in the manufacture of textiles and apparel sector declined during the month, which mainly contributed to the decline in employment as well.
Stock of purchases increased during the month due to the increase in production and new orders. Further, suppliers’ delivery time continued to lengthen in December.
Expectations for the manufacturing activities for the next three months remain positive. However, the firms are concerned about the impact of tax revisions from January 2024, and the shipping disruptions due to the unrest in the Red Sea.
In services sector PMI, the new businesses increased in December 2023 compared to November 2023, particularly with the increases observed in wholesale and retail trade, financial services, insurance, other personal service activities and accommodation, food and beverages sub-sectors.
Business activities continued to expand in December 2023 at a higher pace in line with the positive developments observed in many sub-sectors. Accordingly, significant improvements were observed in business activities related to other personal service activities, transportation and accommodation, food and beverage sub-sectors, amid the festive and holiday seasons, and tourist arrivals reaching its peak. Further, the wholesale and retail trade subsector showed a strong growth due to seasonal sales. Financial services also improved further in line with the increase in lending activities.
Employment declined despite some new recruitments made to meet the seasonal demand, while backlogs of work also continued to decline during December.
Expectations for business activities for the next three months continued to rise in December at a slower pace despite concerns regarding the adverse impacts of VAT amendments and related increases in fuel and utility costs.
FT