Bangladesh economy slips into contraction as September PMI falls to 48.6

Bangladesh's overall economic activity contracted slightly in September as the Purchasing Managers' Index (PMI) fell 1.3 points from the previous month to 48.6, with manufacturing, construction and services weakening while agriculture continued to expand.

Manufacturing recorded the sharpest decline, falling 2.6 points to 44.8, according to a press release by the Metropolitan Chamber of Commerce and Industry (MCCI) issued today (8 October).

Construction also returned to contraction, dropping 3.8 points to 48.5 after expanding in August. Services remained marginally in contraction for a second consecutive month, with its index declining 0.2 points to 49.0.

Agriculture remained the only sector in expansion, although its index fell 1.3 points to 55.2. The sector recorded its 13th consecutive month of expansion.

The September PMI was released jointly by the MCCI and Policy Exchange Bangladesh (PEB) on Wednesday.

In manufacturing, new orders, new export orders, output, stocks of input purchases and finished goods, and imports all contracted at a faster rate. Employment, however, returned to marginal expansion, while input prices continued to rise.

In services, new business and business activity returned to contraction, while employment declined at a slower rate. Input costs continued to rise strongly, and order backlogs remained in contraction, the release said.

Respondents' feedback for September reflected a cautious and mixed outlook for future business conditions. Some firms expected activity to improve in the coming months, supported by confirmed orders, reliable buyers and stronger seasonal demand during the approaching winter and peak business season.

However, many respondents remained concerned about repeated fuel and oil price increases, rising input and operating costs, weak consumer purchasing power, electricity and gas shortages, and limited access to bank financing. Overall, the feedback indicated that business confidence remained cautious.

Despite the overall weakness, the Future Business Index pointed to expansion across all four sectors, suggesting cautious optimism about business conditions.

"Bangladesh's economic dynamism remains under pressure, as weakness in manufacturing, construction and services weighed on overall performance," M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, said.

He added that strengthening domestic and export demand, ensuring a reliable energy supply, easing financing constraints and containing cost pressures would be crucial to restoring economic momentum.