Headline Inflation, as measured by the change in the National Consumer Price Index (NCPI, 2013=100), which is compiled by the Department of Census and Statistics (DCS), decreased to 0.9 per cent in September 2018, the lowest since January 2016, from 2.5 per cent in August 2018 on year-on-year basis. The deceleration in year-on-year inflation in September was driven by both the base effect and the monthly decline in Food prices. The change in the NCPI measured on an annual average basis decreased from 4.7 per cent in August 2018 to 4.0 per cent in September 2018.

When the monthly change is considered, the NCPI decreased from 125.4 index points in August 2018 to 124.4 index points in September 2018 due to decline in prices of the items in the Food category, particularly that of vegetables, coconuts, green chillies and fresh fish. Meanwhile, price increases were observed in the Non-food category, particularly that of Alcoholic Beverages and Tobacco; Transport and Restaurants and Hotels sub-categories.

The Manufacturing Sector PMI decreased to 54.1 index points in September 2018 from 58.2 index points recorded in August 2018. The slowdown observed in manufacturing activities in September was mainly driven by the slowdown in new orders and production, especially in manufacturing of food and beverages activities. Respondents highlighted that they had to increase their prices during the period due to increase in input cost of imported raw materials with rupee depreciation. This led to a decline in demand for their products, which in turn resulted in a decrease in new orders and production. However, new orders and production of manufacturing of textiles, wearing apparel, leather and other related products, which are mostly export oriented improved during this period. Overall employment and stock of purchases also slowed down. Meanwhile, lengthening of suppliers’ delivery time usually indicates that economy is booming with expanding activities in the short run. However, in this instance, lengthening of suppliers’ delivery time was due to manufacturers’ intentional increase of the lead time with the expectation of rupee stabilization. Thus, it does not indicate an expansion in economic activities. Overall, all the sub-indices of PMI recorded values above the neutral 50.0 threshold signalling an overall expansion in September yet at a slower pace compared to August.