Purchasing managers’ index sharply drops in July

The Bangladesh Purchasing Managers' Index (PMI) has plummeted by 27 points month-over-month to 36.9 in July, marking the first contraction in business activities this year.

A PMI reading above 50 signals economic expansion, while a reading below 50 indicates contraction.

The significant drop in July was largely attributed to political unrest following a student uprising that led to Sheikh Hasina's removal from office after over 15 years.

This unrest impacted all major sectors – agriculture, manufacturing, construction, and services – according to the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, and Policy Exchange Bangladesh, which have been surveying 500 Bangladeshi firms since the beginning of the year.

The Singapore Institute of Purchasing and Materials Management (SIPMM) collaborates with local entities on this project, supported by UK International Development.

The PMI serves as a leading economic indicator, providing insights into future economic trends based on current business activity. The survey reflects changes in business conditions compared to the previous month.

In July, the agriculture sector saw a sharp contraction after six months of growth, with declines in new business, activity, and employment indexes. Input costs increased at a faster rate, while the order backlog index expanded more slowly.

The manufacturing sector also experienced a sharp decline after seven months of expansion, with significant drops in new orders, exports, factory output, and supplier deliveries. Conversely, input purchases and input prices expanded more rapidly, and the finished goods index returned to expansion. Imports contracted, and the order backlog index saw slower growth.

In the construction sector, following seven consecutive months of expansion, the indexes for new business, activity, and employment all contracted sharply. However, input costs grew at a slower pace, and the order backlog index expanded.

In the services sector, which had experienced seven months of expansion, there were declines in new business, activity, and employment indexes. Input costs expanded more slowly, and the order backlog index showed a slower rate of contraction.

Looking ahead, slower expansion is anticipated in agriculture and manufacturing, while construction and services are expected to see faster growth.

In a joint statement, the MCCI and Policy Exchange Bangladesh said, "Recent widespread unrest and the subsequent resignation of the prime minister have significantly impacted the economy. Despite sharp contractions across key sectors, the future business index shows some positive signs of recovery."