Economy returns to growth after two months of contraction, October PMI rises to 51.8
After two straight months of contraction, the country's overall economic activity regained positive momentum in October. Bangladesh's Purchasing Managers' Index (PMI) rose by 3.2 points from the previous month to reach 51.8 points.
All four main drivers of the economy — agriculture, industrial production, construction and services — showed signs of growth together. The Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, and Policy Exchange Bangladesh (PEB) jointly published the PMI survey for October.
The report shows that expansion in agriculture was the strongest in October; the sector's index jumped by 6 points to 61.2, keeping its positive run going for a 14th consecutive month. New business and rising employment brought momentum back to the sector, although pressure from high raw material and input prices continued.
Manufacturing also broke out of contraction, with its PMI rising by 6.1 points to 50.9, helped by progress in imports of industrial inputs and stocks of finished goods.
In construction, the index rose by 2.5 points to 51, ending September's stagnation, which has sped up stalled work and created opportunities to hire new workers.
Services also returned to slight expansion, with its PMI rising by 1.3 points to 50.3, although the flow of new orders remains somewhat slow. Overall, entrepreneurs expressed optimism about the business environment in the coming days.
Dr. M. Mashrur Reaz, chairman and chief executive officer of Policy Exchange Bangladesh, said the rise in the index signals a favourable change in the economy, albeit on a limited scale.
But he believes the recovery process is still quite fragile. He said agriculture's firm position and improvement in the export sector played the main role in the turnaround after two difficult months.
Demand for new work and normal business activity in manufacturing, construction and services have still not reached the desired level, and high input costs remain a major challenge for entrepreneurs. This expansion therefore cannot be called a strong recovery in overall market demand.
To sustain this recovery over the long term, Dr. Reaz stressed ensuring uninterrupted energy supply, easing the strain on working capital in industry, and controlling the rising cost burden on businesses.
He noted that a clear and stable environment for doing business is needed to turn entrepreneurs' positive expectations into realistic investment and higher production.
MCCI and Policy Exchange regularly produce this PMI index with sponsorship from the UK government and technical support from the Singapore Institute of Purchasing and Materials Management. It serves as an important leading indicator for measuring the future direction of the country's economy.
