The Manufacturing Sector PMI, following the seasonal pattern, recorded 41.8 in April which is a decrease of 24.7 index points compared to March 2017. This indicates that the manufacturing activities contracted in April 2017, which is largely attributable to the decrease in the Production and New Orders sub-indices, following the significant increases observed in PMI for the month of March 2017. As highlighted by the survey respondents the new year holidays in April have also contributed to this seasonal decline in manufacturing activities. Further, all the sub-indices of PMI declined compared to the previous month. Moreover, all the sub-indices of PMI apart from Suppliers’ Delivery Time sub-index dropped below the neutral 50.0 threshold in April 2017. However, the expectation for activities indicates an improvement for the next three months.

As expected, the Colombo Consumer Price Index (CCPI, 2013=100) based headline inflation, decelerated on a year-on-year basis to 6.9 per cent in April 2017 from 7.3 per cent in March 2017, and CCPI based core inflation also decelerated to 6.8 per cent in April 2017 from 7.3 per cent recorded in the previous month. It is expected that inflation based on the National Consumer Price Index (NCPI, 2013=100), which edged up in March 2017, will also display a similar decline in April 2017. Supported by monetary policy adjustments from end 2015, inflation is projected to decelerate gradually to the desired mid-single digit levels by end 2017, although there could be some monthly fluctuations due to short term supply side disruptions and the base effects of tax revisions in 2016.