The manufacturing sector in Sri Lanka recorded a significant surge in May 2026, with the Purchasing Managers’ Index (PMI) rising sharply to 56.6 points from 42.6 points in April. This increase indicates a return to expansion in manufacturing activity, according to data released by the Central Bank of Sri Lanka (CBSL). This recovery provides a positive signal for the national economy amidst global uncertainties and the impact of the ongoing conflict in the Middle East.
This impressive growth in the manufacturing sector was largely driven by the strong performance of the textiles and apparel industry. Data shows a significant increase in new orders, which jumped to 52.6 points from 36.4 points the previous month. In line with this, the production index also saw a dramatic rise to 54.6 points, up from 30.5 points in April. Increased intensity in factory activity also positively impacted employment, with the employment index rising to 59.7 points from 47.0 points. Additionally, the stock of purchases rose to 52.6 points, supported by higher production requirements and increased market demand.
Manufacturers attributed part of this performance improvement to a higher number of working days in May compared to the previous month. However, logistical challenges remain, as supplier delivery times continue to indicate significant delays, with the index at 66.3 points. Furthermore, companies noted that the challenging operating environment linked to the Middle East conflict continues to affect business operations and sentiment.
Meanwhile, Sri Lanka’s services sector also showed expansive performance with an index value of 56.9 points in May 2026. This growth was driven by strong performances in financial services, professional services, and personal services, as well as positive contributions from wholesale and retail trade and goods transportation. Although new business volumes increased, the services sector recorded a decline in employment due to contract expirations, retirements, and resignations.
Looking ahead, businesses in both sectors remain optimistic about activity over the next three months. Manufacturing firms expect operations to remain above the neutral threshold, while service providers anticipate stronger demand supported by higher tourist arrivals during the Perahera season and improving domestic economic conditions. Nevertheless, the Central Bank of Sri Lanka noted that risks associated with the Middle East conflict and broader global uncertainties continue to weigh on business confidence and could affect future growth prospects.
