Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100) decreased to 1.3% in September 2023 from 4.0% in August 2023. The decline in the headline inflation is mostly in line with the projections envisaged by the Central Bank of Sri Lanka (CBSL) in July 2023.

The Food deflation (Y-o-Y) continued for the third consecutive month recording 5.2% in September 2023 from 4.8% in August 2023. Meanwhile, the Non-Food inflation (Y-o-Y) decreased further to 4.7% in September 2023 from 8.7% in August 2023. Monthly change of CCPI recorded at 0.88% in September 2023 due to the price increases of 0.18% observed in the items of Food category and 0.70% recorded in the items of Non-Food category. The core inflation (Y-o-Y), which reflects the underlying inflation in the economy, decreased to 1.9% in September 2023 from 4.6% in August 2023.

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The construction industry continued to perform at a subdued level in August 2023, yet reaching towards the neutral threshold, recording a Total Activity Index value of 47.0. As per the respondents, firms tend to undercut prices to secure the limited available projects in a highly competitive tender bidding process.

The lack of new projects continued to have a severe adverse impact on the industry as reflected by the continuous decline in New Orders. Many respondents highlighted that the limited availability of local and foreign funded construction projects is still a major concern in the industry. In this background, firms laied off contract based employees to scale down operations as reflected by the continuous decline in Employment. Further, Quantity of Purchases continued to decline, yet at a slower rate during the month. In the meantime, Suppliers’ Delivery Time shortened during the month mainly due to reduced pressure on supplier capacity.