Sri Lanka Services Growth Cools in January

Sri Lanka’s Services PMI eased to 64.5 in January 2026 from 67.9 in December, indicating a softer expansion in the services sector. The moderation reflected a slight easing of demand after the post-holiday peak. Still, strength remained in wholesale and retail trade, accommodation, food and beverage services, and financial services, supported by increased lending activity. New businesses fell to 60.8 from 64.6, led by financial services, education, and transportation, though growth was more cautious than in December. Meanwhile, employment rose to 59.2 from 52.6, as firms maintained workforce expansion to meet demand. Backlogs of work declined to 48.9 from 53.8, reflecting improved efficiency and a temporary easing of pressures. Expectations for activity over the next quarter stayed positive, supported by favorable macroeconomic conditions, seasonal demand, and continued normalization after weather-related disruptions.

Sri Lanka’s Services PMI rose sharply to 67.9 in December 2025 from 50.5 in November, indicating a strong expansion in services sector activity. The increase was mainly driven by growth in wholesale and retail trade amid heightened festive season demand, with additional support from business-related activities, accommodation, and food and beverage services. New Businesses increased to 64.9 from 53.6, underpinned by improved activity in wholesale and retail trade, alongside strengthened performance in financial services. Employment growth moderated during the month, with the index easing to 52.6 from 55.7. Meanwhile, Backlogs of Work continued to expand for the second consecutive month, rising to 53.8 from 51.1. Looking ahead, Expectations for Business Activity over the next quarter turned optimistic, supported by improving macroeconomic conditions, seasonal tourism-related factors, and the normalization of weather-related disruptions.

Sri Lanka’s Services PMI eased to 50.5 in November 2025 from 66.0 in the previous month, marking a lowest reading since April 2023, signaling service sector activity continued to expand but at a markedly slower pace. The expansion was primarily supported by accommodation, food, and beverage services, although adverse weather conditions toward the end of the month weighed on overall activity. New businesses increased (53.6 vs 61.5 in October), underpinned by stronger demand for financial services and improved activity in wholesale and retail trade. Employment (55.7 vs 52.5) continued to expand, as firms added staff to meet seasonal operational needs. Backlogs of work (51.1 vs 47.8) reversed a three-month decline. Looking ahead, the expectations for activities over the next quarter (63.3 vs 84.2) continued to improve, albeit at a slower pace, with some respondents noting potential disruptions to consumer demand due to adverse weather conditions.