Bangladesh economy returns to expansion after two months of contraction: PMI

The October reading, released jointly by the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka and Policy Exchange Bangladesh on Monday, showed expansion across all four key economic sectors, although demand-related indicators remained weak in several sectors and business costs continued to rise.

The agriculture sector maintained its expansion for the 14th consecutive month, with its PMI increasing 6 points to 61.2, indicating faster growth.

New business, business activity and employment continued to expand, while the order backlogs index also returned to expansion. However, input costs remained on the rise.

The manufacturing sector returned to expansion with its PMI climbing 6.1 points to 50.9. Stocks of input purchases, finished goods and imports returned to expansion, while employment and supplier deliveries continued to grow.

However, new orders, new export orders and factory output remained in contraction, while the order backlogs index continued to show sharp contraction. Input prices also recorded strong expansion, indicating persistent cost pressures.

The construction sector's PMI rose 2.5 points to 51.0, returning to expansion in October. Employment also recovered to expansion after remaining unchanged in September, while order backlogs continued to grow.

However, new business and construction activity remained in contraction, while input costs recorded strong expansion.

The services sector also returned to expansion, with its PMI increasing 1.3 points to 50.3. Employment recovered, but new business, business activity and order backlogs continued to contract. Input costs in the sector also remained under strong upward pressure.

Meanwhile, the Future Business Index recorded expansion across all four sectors, indicating positive expectations about future business conditions.

Commenting on the latest PMI reading, Policy Exchange Bangladesh Chairman and CEO M Masrur Reaz described the return to expansion as a small but positive development after two difficult months, supported particularly by stronger agricultural and export performance.

However, he cautioned that the recovery remained fragile, as new orders and business activity continued to shrink in manufacturing, construction and services, while input costs remained elevated.

"The divergence suggests that the return to expansion has yet to translate into a broad-based strengthening of demand," Masrur said.

He stressed that ensuring reliable energy supplies, easing working-capital constraints and containing further increases in business costs would be critical to sustaining the recovery.

Positive expectations for future business offer some encouragement, but translating confidence into investment and production requires more predictable operating conditions, the Policy Exchange Bangladesh chairman added.

The Bangladesh PMI is a joint initiative of MCCI and Policy Exchange Bangladesh, developed with support from the UK government and technical assistance from the Singapore Institute of Purchasing and Materials Management (SIPMM).

The index aims to provide timely insights into the country's economic health to help businesses, investors and policymakers make informed decisions, reports UNB.