Bangladesh businesses on course for expansion as PMI climbed to 55.7 in October

Bangladesh businesses have started to expand in October after three subsequent months of contraction.

This was reflected in the latest report of Purchasing Managers Index (PMI) published by the Metropolitan Chamber of Commerce and Industry (MCCI) today (7 November).

The MCCI and Policy Exchange Bangladesh (PEB) jointly released the PMI, according to a press release. 

All key sectors of the country's economy posted expansion readings in October, with a 6-point increase from September, climbing to 55.7.

The index, which stood at over 65 in June, saw a fall after the student-led July-August mass uprising which led to the fall of the Awami League regime.

The PMI is an economic indicator that helps understand the economic health of a country, through identifying the turning points in the business cycle and provides an early indication of where the economy is headed. It summarises whether markets are expanding, staying the same, or contracting through regular surveys of senior executives in the private sector.

An index above 50 signals expansion, while a figure below 50 suggests contraction. The PMI can be viewed as a leading indicator for understanding the growth of the sector or economy relative to the previous month.

"Despite all key sectors of the economy posting expansion readings, the country continues to grapple with domestic challenges such as frequent protests and sluggish improvements in law and order, as well as slowdown in public administration," reads the release. 

Country's businesses also agree with the findings of the report.

"Our supply chain faced disruptions in July and August. However, since September, it has started to regain momentum, though it hasn't yet reached the expected level," Zaved Akhter, managing director and CEO of Unilever, told The Business Standard.

Zaved, also president of the Foreign Investors Chamber of Commerce and Industry (FICCI), emphasized the need to restore law and order, noting, "The law and order situation has improved compared to previous months, but it is not yet fully stable."

"Some industries are still impacted by incidents of vandalism. Without complete stability in law and order, it will be difficult to restore full business confidence," he added.

He also expressed optimism saying, "I am hopeful that, as law and order continues to improve, business confidence will grow accordingly."

According to the report, the latest PMI readings provide early indications of a return to expansion track for the Bangladesh economy with the agriculture, construction, and service sector posting expansion for the first time in months, whereas the manufacturing sector posted a faster rate of expansion.   

The agriculture sector reverted to an expansion after recording 3 months of consecutive contractions. The sector posted a first-time expansion for the indexes of new business and business activity, whereas the employment posted a faster contraction.

The input costs index posted a faster expansion, whereas the order backlogs index posted a slower contraction.

The manufacturing sector posted a faster rate of expansion. The sector posted expansion readings for the indexes of new orders, new exports, factory output, input purchases, and input prices. Contraction readings were recorded for the indexes of finished goods, imports, employment, supplier deliveries, and order backlogs.

The services sector also reverted to an expansion after recording 3 months of consecutive contractions. The sector posted a first-time expansion for the indexes of business activity and order backlogs. The new business index posted a slower expansion, whereas the input costs index posted a faster expansion. 

The construction sector, however, reverted to a marginal expansion after recording 3 months of consecutive contractions. The sector posted slower contraction readings for the indexes of construction activity, employment, order backlogs, but the new business index reverted to a marginal contraction. The input costs index posted a faster rate of expansion.

In terms of the future business index, slower expansion rates were recorded for all key sectors of agriculture, manufacturing, construction, and services.