Key economic sectors expand faster

Bangladesh's key economic sectors expanded faster month- on-month in January, as reflected in the Bangladesh Purchasing Managers' Index (PMI) that recorded a reading of 65.7, up 4.0 points from December's.

The PMI provides a snapshot of economic activity, with a reading above 50 indicating expansion, below 50 signalling contraction, and 50 representing stagnation.

The latest reading was driven by stronger expansion in agriculture, construction, and services, while the manufacturing sector experienced a slower expansion.

However, the PMI report predicts that future economic momentum will depend on political stability, particularly regarding the timeline and roadmap for a transition to an elected government.

The agriculture sector recorded its fourth consecutive month of expansion, with a faster expansion in business activity. Both new business-and order-backlog indices returned onto expansion territory.

However, the employment index fell into contraction, while input costs expanded at a slower rate.

As for manufacturing, the sector posted its fifth consecutive month of expansion, but at a slower pace. Indicators for new orders, new exports, factory output, input purchases, imports, input prices, and supplier deliveries showed slower expansion.

The finished-goods index accelerated, while the employment index returned to expansion, and order backlogs contracted at a slower rate.

Construction sector recorded its second month of expansion at a faster pace, with stronger growth in new business, construction activity, and input costs.

However, the employment index moved into contraction, and the order-backlog index showed a faster contraction.

Services sector expanded for the fourth consecutive month, with a faster expansion in new business, business activity, employment, and order backlogs. The input- cost index also rebounded.

"The latest PMI readings indicate that the economy remains on an expansion track for the fourth consecutive month, likely driven by growing exports, seasonal consumption trends, and improvements in the agro-supply chain," says a press release on the PMI.

However, new business investments and expansion confidence remain weak, particularly among firms catering to the domestic market.

"This is attributed to sluggish demand, rising business costs, and energy-supply disruptions."

The Bangladesh PMI was launched in 2024 by the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange Bangladesh, in collaboration with the Singapore Institute of Purchasing & Materials Management (SIPMM) and supported by UK International Development.

The index covers key economic sectors and is based on monthly surveys of over 500 private-sector enterprises. The survey measures changes in business activity compared to the previous month using the diffusion-index methodology, aggregating responses across various economic indicators. The methodology was developed by SIPMM, with technical support from Policy Exchange.

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