Sri Lanka’s construction sector regains momentum after election-related uncertainty

Last Updated on December 1, 2024 6:21 am

The construction sector shifted gears in October, looking past the election-related jitters, as the sector got into high gear, shifting to an expansion from a brief contraction in September.

The Purchasing Managers’ Index (PMI) for the construction sector showed the index coming in at 54.3 for October, from 48.6 index points in September.

The construction sector saw a persistent availability of new projects, which keeps the industry on a sustained footing, reflecting the activity in the sector is coming back up again to its former vibrancy, due to the rates declining, inflation cooling and in fact turning into negative and dollar liquidity reaching a healthy level, which together help seamless imports of construction-related materials, helping the uninterrupted activity in the sector.

Further, many respondents to the survey have also said that the private investors are increasingly showing interest in projects, due to the decline in the prices of construction sector materials.

The prices have been declining in the construction sector, as the rupee has been appreciating against the dollar so far this year, on top of a little over 12 percent appreciation seen in 2023.

As most of the construction sector materials are imported, this in fact provides a relief to the builders to cut down on their construction costs.

Meanwhile, despite the increase in the activity, the firms have been cautious in hiring, as the employment sub-index showed a contraction.

It appears that the builders need more evidence and activity, to increase hiring more meaningfully, as they had to let go hundreds of thousands of people during the last few years, specially due to the economic downturn caused mainly by the shortage of foreign currency from around the second half of 2021.

The Central Bank further easing the rates this week should further ramp up activity in the sector, as there is a strong correlation between the building activity and rates in an economy.

Housing activity in particular should kick start more convincingly, with the current low interest rates.

Meanwhile, the expectations for the sector also showed positive sentiments, predominantly due to the increase in project availability.

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