Bangladesh’s overall economic activity slowed in August, with the manufacturing sector suffering a sharp downturn and the services sector slipping into contraction for the first time in nearly two years.
The country’s composite Purchasing Managers’ Index (PMI) fell 7.9 points from July to 49.9 in August, indicating an overall contraction in private-sector economic activity, according to the latest PMI report.
The index is jointly prepared by the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange Bangladesh (PEB). The August report was released on Tuesday.
A PMI reading above 50 indicates expansion, while a reading below 50 signals contraction.
Manufacturing bears the brunt
The manufacturing PMI plunged 18 points to 47.4 in August from the previous month, marking the sharpest deterioration among the four sectors covered by the index.
New orders, new export orders, output, input purchases, imports and employment all moved into contraction territory during the month.
At the same time, input costs rose rapidly, adding further pressure on manufacturers.
Manufacturers cited difficulties in accessing finance through banking channels, shortages of electricity and gas, and declining orders in the garment sector as major factors behind the slowdown.
They also called for measures to reduce energy and production costs.
Services enter contraction
The services sector also weakened sharply, with its PMI falling 6.8 points to 49.2 in August.
It was the first time in 22 months that the sector entered contraction territory.
Although new business and business activity continued to increase, the pace of expansion slowed significantly. Employment also recorded a notable contraction.
Service-sector businesses called for greater financial support, lower electricity bills and operating costs, and reduced pressure from income tax and other taxes.
Agriculture remains resilient
Agriculture was the strongest-performing sector in August, with its PMI rising 1.3 points to 56.5.
The sector remained in expansion for the 12th consecutive month, supported by increases in new business, business activity and employment.
Although input costs continued to rise, the pace of increase eased somewhat during the month.
The construction sector also returned to expansion, with its PMI rising to 52.4.
Construction activity and employment increased, although input costs rose rapidly and unfinished orders remained in contraction.
Businesses remain cautiously optimistic
Despite the slowdown, businesses retained positive expectations about the future, although the level of optimism weakened somewhat.
Businesses across sectors called for lower operating costs, greater access to financial support and a more supportive policy environment.
Agribusinesses, meanwhile, called for lower prices of agricultural inputs, particularly pesticides.
Policy Exchange Bangladesh Chairman and CEO Dr M Masrur Reaz said the August PMI of 49.9 showed that overall economic activity was close to the neutral threshold, despite temporary pressures on manufacturing and services.
He said continued expansion in agriculture and the return of construction to growth suggested underlying resilience in the economy.
The manufacturing slowdown was partly driven by lower monthly exports and temporary energy disruptions caused by maintenance at LNG infrastructure, he said.
“Improved energy supply, stronger export demand and measures to restore business confidence can help the economy regain momentum,” Reaz said.