Bangladesh’s overall economic activity contracted marginally in August as a sharp slowdown in manufacturing and services outweighed continued expansion in agriculture and a recovery in construction, according to the latest Purchasing Managers’ Index (PMI).

The headline PMI fell 7.9 points to 49.9 in August from 57.8 in July, slipping below the 50-point threshold that separates expansion from contraction. A reading above 50 indicates expansion, while a reading below 50 signals contraction and 50 indicates no change from the previous month.

The August PMI, released on September 7, showed mixed performance across the four major sectors, with manufacturing recording the sharpest deterioration and services entering contraction for the first time in nearly two years.

The manufacturing PMI plunged 18 points to 47.4 in August from 65.4 in July, moving decisively into contraction. New orders, new export orders, output, stocks of input purchases, imports and employment all reverted to contraction during the month.

At the same time, input prices continued to rise at a faster pace, suggesting that manufacturers faced increased cost pressures even as business activity weakened. Order backlogs remained in contraction, although the pace of decline moderated, while supplier delivery times remained unchanged.

The services sector also contracted, with its PMI falling 6.8 points to 49.2 in August from 56.0 in July. It was the sector’s first contraction after 22 consecutive months of expansion.

New business and business activity in services continued to expand, but at slower rates. Employment, however, contracted sharply. Input costs continued to increase, although at a slower pace, while order backlogs remained in contraction with the pace of decline easing.

In contrast, agriculture remained a key source of support for the economy. Its PMI rose 1.3 points to 56.5 in August from 55.2 in July, marking the sector’s 12th consecutive month of expansion.

New business and business activity in agriculture remained in expansion, while employment increased. Input costs continued to expand strongly, although the pace moderated slightly. Order backlogs, however, remained in contraction.

The construction sector also returned to expansion, reaching 52.3 in August compared with 49.3 in July, according to the sector chart on page two of the PMI report. Construction activity and employment moved into expansion, although new business remained in contraction at a slower pace. Input costs accelerated, while order backlogs moved into contraction.

The report attributed the weakness in manufacturing partly to weaker monthly exports and temporary energy disruptions associated with maintenance of LNG infrastructure.

Commenting on the findings, Dr M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, said the August PMI indicated that economic activity remained broadly near the neutral threshold despite temporary pressures on manufacturing and services.

He said continued expansion in agriculture and the return of construction to growth highlighted underlying resilience in the economy.

“Improved energy availability, stronger export demand and supportive measures to restore business confidence can help the economy regain momentum and place it on a firmer growth trajectory,” he said.

Meanwhile, the Future Business Index showed a slight decline in optimism across all sectors, indicating that businesses became somewhat less confident about near-term prospects.

The Bangladesh PMI is a forward-looking economic indicator based on monthly surveys of more than 500 private-sector enterprises. It tracks changes in business activity across agriculture, manufacturing, construction and services and uses a diffusion-index methodology to assess the direction of economic activity.

The latest reading therefore points to a near-stagnant economy rather than a broad-based collapse, with weakness concentrated particularly in manufacturing and services, while agriculture and construction provided some offsetting support.