Economy shows signs of improvements

The Bangladesh Purchasing Managers' Index (PMI) for September 2024 increased by 6.2 points to 49.7 from the previous month's 43.5, showing signs of slight improvements in the overall economy.

This rise reflects a slower pace of contraction across key sectors such as agriculture, construction, and services, with the manufacturing sector returning to expansion after two months of decline.

The Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka and Policy Exchange Bangladesh (PEB) released the September PMI report on Tuesday.

The PMI is a pioneering initiative that aims to offer timely and accurate insights into the country's economic health to help businesses, investors and policymakers make informed decisions.

It was developed by MCCI and PEB, with support from the UK government and technical support from Singapore Institute of Purchasing & Materials Management (SIPMM).

The latest PMI readings indicate slight but gradual improvements in the overall economy, despite some disruptions and challenges facing the country. It noted that the manufacturing sector has reverted to an expansion, also reflected in positive export growth in September.

It also said business sentiments, while guarded on the recent disruptions in some industrial belts, are positive with all key sectors of the economy recording faster expansion rates for the future business index.

The report stated that the overall reading suggests gradual improvement in the economy compared to last month as things normalise despite some disruptions and challenges facing the country. However, the economy is still in contraction mode for three consecutive months now, and far from the vibrancy seen in the pre-July period.

The agriculture sector recorded a contraction for the third month but at a slower rate. The sector posted a slower contraction rate for the indexes of new business, business activity, and employment. The input costs index posted a slower expansion, whereas the order backlogs index posted a faster contraction.

The manufacturing sector reverted to an expansion after recording two months of contraction.

The indexes of new orders and input purchases reverted to an expansion, but the new exports index reverted to a contraction. Faster contractions were recorded for the indexes of factory output and employment, whereas slower contractions were recorded for the indexes of finished goods and order backlogs.

Expansion readings were recorded for the indexes of imports, input prices, and supplier deliveries.

The construction sector recorded a contraction for the third month but at a slower rate. The new business index reverted to an expansion, but both the indexes of employment and order backlogs reverted to contractions. The construction activity index posted a slower contraction, whereas the input costs index posted a slower expansion.

The services sector recorded a contraction for the third month but at a slower rate. The new business index reverted to an expansion, whereas slower contraction readings were recorded for the indexes of business activity and employment. The input costs index posted a slower expansion, whereas the order backlogs index reverted to a contraction.

In terms of the future business index, faster expansion rates were recorded for all key sectors of agriculture, manufacturing, construction, and services. Business sentiments, while guarded on the recent disruptions in some industrial belts, are optimistic about the future.

The PMI is a forward looking (or "leading") economic indicator which helps understand the direction in which the economy is headed. First developed in the United States in 1948, it has since then been used in over 50 countries for its accuracy and reliability in capturing the pulse of key sectors and the economy.

It is widely used by investors, businesses and policymakers for making key decisions.

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