Bangladesh’s PMI returns to expansion in October, rises 3.2 points to 51.8

Bangladesh’s overall Purchasing Managers’ Index (PMI) rose by 3.2 points to 51.8 in October from 48.6 in September, signalling a return to economic expansion after two consecutive months of contraction.

The latest reading released jointly by The Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, and Policy Exchange Bangladesh (PEB) on Tuesday indicates a recovery in economic activity, with agriculture maintaining its expansionary trend while manufacturing, construction and services also returned to growth.

The agriculture sector recorded its 14th consecutive month of expansion, with its index rising by 6.0 points to 61.2, indicating faster growth. New business, business activity and employment continued to expand, while order backlogs also returned to expansion. The input costs index remained in expansionary territory.

Manufacturing also returned to expansion, with its PMI increasing by 6.1 points to 50.9. Stocks of input purchases, stocks of finished goods and imports moved back into expansion, while employment and supplier deliveries continued to grow. However, new orders, new export orders and factory output remained in contraction. Input prices recorded strong expansion, while order backlogs continued to contract sharply.

The construction sector also moved back into expansion, gaining 2.5 points to reach 51.0 in October. Employment returned 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.

Similarly, the services sector returned to expansion, with its PMI rising by 1.3 points to 50.3. Employment moved back into expansion, although new business, business activity and order backlogs continued to contract. The input costs index also remained in strong expansionary territory.

The Future Business Index recorded expansionary readings across all four sectors, indicating positive expectations about future business conditions.

Commenting on the latest PMI reading, Dr M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, said, "October's performance marked a modest but encouraging improvement after two challenging months, driven particularly by stronger agricultural and export performance."

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

"The divergence between improving headline PMI figures and weak demand indicators suggested that the return to expansion had yet to translate into a broad-based recovery in economic activity," he said.

Ensuring reliable energy supplies, easing working-capital constraints and containing further increases in business costs would be crucial to sustaining the recovery, he added.

Dr Reaz also said, "Positive expectations about future business conditions offered some encouragement, but translating business confidence into investment and production would require more predictable operating conditions."

The Purchasing Managers’ Index (PMI) is a monthly economic indicator that measures the health and overall direction of the private-sector economy. It is based on confidential monthly surveys of senior purchasing executives and supply chain managers at private-sector companies.

The index is measured on a scale of 0 to 100. A reading above 50 indicates economic expansion, 50 signals no change, and a reading below 50 indicates contraction.