Economy slows in Dec, but manufacturing, construction drive growth: PMI

The overall pace of business in Bangladesh decreased slightly in December compared to the previous month, according to the Purchasing Managers' Index (PMI).

The PMI index declined to 61.7 in December from November's 62.2 but manufacturing and construction sectors showed quicker expansion, signalling a slower but steady expansion in economic activities.

The PMI is a leading economic indicator that helps understand the economic health of a country, providing insights into key economic sectors and capturing early trends. Many advanced and developing economies regularly use PMI reports to track shifts in the business cycle and economic variables.

An index above 50 signals economic growth, while below 50 indicates contraction, according to the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, and the Policy Exchange Bangladesh, which monitor business procurement levels.

The MCCI, in partnership with the Policy Exchange Bangladesh and with support from the UK's Foreign, Commonwealth, and Development Office, unveiled the PMI results at the Metropolitan Chamber's Gulshan office in the capital today (7 January).

The PMI, a survey-based index to determine the dynamics of the economy, shows the economy slowed in December as key sectors such as agriculture and services slowed, but the rapid growth of the manufacturing and construction sectors offset much of this loss.

It also shows that business growth rose gradually from August to November.

The report covers four sectors — service, manufacturing, agriculture, and construction.

In November, the agriculture sector PMI was 67.2 but dropped to 52.8 in December, while the services sector PMI decreased from 64 to 59.9.

However, manufacturing and construction showed quicker expansion. The manufacturing sector had a PMI of 60.9 in November, which increased to 69.8 in December, and the construction sector's index jumped from 49.6 to 60.4.

"Despite a small decrease from the previous month, the economy remains on the expansion track. Robust growth was recorded for both the manufacturing and construction sectors, whereas the agriculture and services sectors posted slower growth," states the PMI report.

Presenting the report, Farooq Ahmed, secretary general and CEO of the MCCI, stated that it is encouraging that the decline is slight and the index remains above 50 points.

"The most important aspect is to maintain this positive trend," he added.

Farooq also announced that the PMI will be published on the 7th of every month. "We compiled the report after surveying approximately 600 traders," he mentioned.

He further noted that the index provides valuable insights for policymakers in the government, helping them identify critical areas of focus. Similarly, the private sector can gauge the strength of the economy's momentum through this data.

Farooq remarked that the country experienced significant changes in governance following the student-led uprising. The interim government has been working diligently to maintain a stable business environment. However, the confidence of business leaders has yet to fully recover.

Despite these challenges, both business activities and exports have shown growth, which is a positive indicator for the economy, he said.

Responding to a question, the MCCI secretary general acknowledged the current slowdown in the business environment, attributing it to the ongoing reform period. 

"Our members are adopting a wait-and-see approach regarding the government's initiatives to improve the business climate," he explained.