Bangladesh’s private-sector activity returned to expansion in October after contracting for two consecutive months, although weak new orders and rising input costs continued to weigh on businesses across several key sectors.
The Purchasing Managers’ Index (PMI) rose 3.2 points from September to 51.8, crossing above the 50-point threshold that separates expansion from contraction. All four major sectors – agriculture, manufacturing, construction and services – recorded expansion readings, according to the October PMI report released on Sunday by the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange Bangladesh (PEB).
Agriculture led the recovery, with its index rising six points to 61.2, marking the sector’s 14th consecutive month of expansion. New business, business activity and employment continued to grow, while order backlogs returned to expansion. Input costs also remained on an upward trajectory.
Manufacturing recorded the sharpest monthly improvement among the other sectors, gaining 6.1 points to reach 50.9 and return to expansion. Stocks of input purchases, finished goods and imports also moved into expansion, while employment and supplier deliveries continued to expand.
But the improvement in manufacturing activity did not extend to demand. New orders, new export orders and factory output remained in contraction, while order backlogs continued to contract sharply. Input prices posted strong expansion.
Construction returned to expansion at 51.0, up 2.5 points from September. Employment moved back into expansion after remaining unchanged in the previous month, and order backlogs continued to grow. New business and construction activity, however, remained in contraction, while input costs rose sharply.
Services also edged back into expansion, with its index increasing 1.3 points to 50.3. Employment returned to expansion, but new business, business activity and order backlogs continued to contract. Input costs remained under strong upward pressure.
The contrast between improving headline readings and weak demand indicators suggests that the return to expansion has yet to translate into stronger business activity across the economy.
“The October PMI reading marks a small but positive development as it expands after two difficult months,” said Policy Exchange Bangladesh Chairman and Chief Executive Officer M Masrur Reaz.
He said the improvement was supported particularly by stronger agricultural and export performance, but warned that the recovery remained fragile as new orders and business activity continued to shrink in manufacturing, construction and services, while input costs remained elevated.
Reliable energy supplies, easier access to working capital and control of rising business costs would be critical to sustaining the recovery, he said.
The Future Business Index recorded expansion across all four sectors, pointing to positive expectations for business conditions.
The PMI was developed by MCCI and Policy Exchange Bangladesh with support from the UK government and technical assistance from the Singapore Institute of Purchasing & Materials Management.
