Sri Lanka, July 17 -- Sri Lanka's manufacturing sector continued to expand in June, but emerging concerns linked to instability in the Middle East are beginning to temper business confidence, even as services activity gathered pace on the back of stronger domestic demand and tourism-related momentum.

The latest Purchasing Managers' Index (PMI) released by the Central Bank showed manufacturing activity eased to 53.0 in June from 56.6 in May, remaining in expansionary territory but growing at a slower pace. At the same time, the Services PMI accelerated to 58.5 from 56.9, highlighting an increasingly divergent recovery between the two sectors.

While manufacturers continued to report growth in production, particularly in the food and beve...