Bangladesh PMI drops to 49.9 in August amid manufacturing slowdown

Bangladesh’s overall economic activity slowed in August, with the Purchasing Managers’ Index (PMI) falling 7.9 points from July to 49.9, indicating a contraction in overall economic activity during the month.

The PMI, prepared by the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange Bangladesh (PEB), showed that manufacturing and services experienced the sharpest declines. However, agriculture continued to expand, while construction returned to growth.

The agriculture PMI rose 1.3 points to 56.5 in August, remaining in expansion territory for the 12th consecutive month. New business, business activity and employment all expanded, although the pace of increase in input costs eased slightly.

Manufacturing, meanwhile, recorded a significant deterioration. Its PMI dropped 18 points from July to 47.4. New orders, new export orders, production, input purchases, imports and employment all moved into contraction territory. Input prices also rose rapidly during the month.

The construction sector returned to expansion, recording a PMI of 52.4. Construction activity and employment increased, although input costs continued to rise rapidly and outstanding orders remained in contraction.

The services sector also entered contraction for the first time in 22 months. Its PMI fell 6.8 points to 49.2. Although new business and business activity continued to grow, the pace slowed, while employment contracted significantly.

Businesses remained broadly optimistic about the future, although the level of confidence declined somewhat. They called for lower operating costs, increased financial support and a more supportive policy environment.

Manufacturers cited difficulties in accessing funds through banking channels, shortages of electricity and gas, and declining apparel export orders as key reasons for the slowdown. They also called for lower energy and production costs.

Service-sector businesses sought greater financial support, lower electricity bills and operating costs, and reduced tax burdens.

Dr M Masrur Reaz, Chairman and CEO of Policy Exchange Bangladesh, said the August PMI of 49.9 showed that overall economic activity remained close to the neutral threshold, although manufacturing and services faced temporary pressures.

He said the continued expansion in agriculture and the recovery in construction reflected underlying resilience in the economy. The manufacturing slowdown was partly due to lower monthly exports and temporary energy disruptions caused by maintenance of LNG infrastructure.