Bangladesh’s private sector activity slipped into contraction in August for the first time in two years, as gas and power shortages disrupted manufacturing, weakened new orders and pushed the country’s Purchasing Managers’ Index (PMI) below the expansion threshold.
The PMI, an early indicator of business activity based on monthly changes in orders, output, employment and costs reported by companies, sharply fell 7.9 points from July to 49.9 in August, according to the latest report released by the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka and Policy Exchange Bangladesh (PEB).
A PMI reading above 50 indicates expansion, while a reading below 50 signals contraction.
The August reading suggests that businesses faced a slowdown after stronger activity in July.
Manufacturing was the biggest drag on the economy, with its PMI falling sharply by 18 points to 47.4 in August from 65.4 in July.
The sector moved into contraction as new orders, export orders, output, input purchases, imports and employment all declined. Businesses reported that shortages of gas and electricity disrupted production, while weaker orders from the ready-made garment sector added to the pressure.
Manufacturers also highlighted difficulties in accessing funds through banking channels and rising production costs. Input prices continued to expand at a faster pace, putting further pressure on businesses.
The slowdown in manufacturing came despite continued expansion in agriculture and a recovery in construction.
The services sector also slipped into contraction for the first time in 22 months. Its PMI declined 6.8 points to 49.2 in August from 56 in July.
Although new business and overall activity continued to expand, the pace slowed. Employment contracted sharply, while businesses faced higher input costs and weaker order backlogs.
Agriculture remained the strongest-performing sector, recording its 12th consecutive month of expansion. Its PMI rose to 56.5 in August from 55.2 in July, supported by growth in business activity, new orders and employment.
However, agricultural businesses continued to face higher input costs and called for measures to reduce the prices of key supplies, particularly pesticides.
Construction returned to growth after contracting in July, with its PMI rising to 52.4 in August from 49.3. Construction activity and employment expanded, although new business remained weak. Input costs increased at a faster pace, while order backlogs moved into contraction.
Businesses surveyed for the PMI maintained a cautious outlook, saying improvements in energy supply, easier access to finance, lower operating costs and supportive policy measures would be critical to restoring confidence.
Manufacturers called for lower fuel prices and production costs, while service-sector businesses sought financial support, lower electricity bills and reductions in income tax and other charges.
“The August PMI reading of 49.9 indicates that Bangladesh’s economic activity remained broadly near the neutral threshold, despite temporary pressures on manufacturing and services,” said Policy Exchange Bangladesh Chairman and CEO M Masrur Reaz.
He said the manufacturing slowdown partly reflected weaker monthly exports and temporary energy disruptions linked to LNG infrastructure maintenance.
“Looking ahead, 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 added.
The Future Business Index showed a slight decline in optimism across all sectors, reflecting concerns over production costs, energy availability and demand conditions.
The PMI was developed by MCCI and PEB with support from the UK government and technical assistance from the Singapore Institute of Purchasing & Materials Management. It tracks monthly changes in business conditions across agriculture, manufacturing, construction and services.
