PMI indicates softer pace of economic expansion

Bangladesh's Purchasing Managers' Index (PMI) slowed in April, falling 8.8 points from the previous month to 52.9, signaling a softer pace of economic expansion.

The latest reading reflects weaker growth across manufacturing, construction, and services sectors, although agriculture posted a stronger rate of expansion.

A PMI above 50 indicates expansion, 50 suggests no change, and below 50 signals contraction. April's reading, while still in expansionary territory, marks the lowest since October 2024, when the current growth trend began.

According to the report released on Wednesday, the agriculture sector recorded its seventh consecutive month of growth, with faster expansion in both new business and business activity indices.

Input costs increased at a slower pace, while the employment index returned to expansion and order backlogs contracted more slowly.

Manufacturing also expanded for the eighth straight month, albeit at a slower pace.

Most indices remained positive except for order backlogs, which saw a sharper contraction, continuing a nine-month streak of decline.

The construction sector saw its fifth month of expansion, albeit at a reduced pace.

New business, employment, and input costs all grew more slowly, while construction activity returned to growth. However, order backlogs contracted more sharply.

The services sector expanded for the seventh consecutive month, though growth decelerated.

Indices for new business, employment, and input costs under the services sector all showed slower expansion rates, while the business activity index slipped into contraction. The order backlog index also contracted more rapidly.

In terms of business expectations, the manufacturing and construction sectors showed faster expansion in their future business indices.

The agriculture sector saw a slower pace of future expansion, while the services sector rebounded to growth. "The latest PMI readings indicate continued expansion in all key sectors, but at a slower rate," said Dr. M. Masrur Reaz, Chairman, and CEO of Policy Exchange Bangladesh.

He further stated that April's PMI was the lowest since the expansion phase began in October 2024. "Extended public holidays, early impacts of US tariffs on apparel exports, and energy supply disruptions are likely contributing to the loss of momentum."

The PMI is a forward-looking economic indicator that helps gauge the direction of the economy. First developed in the US in 1948, it is now used in more than 50 countries for its accuracy in tracking economic trends. Investors, businesses, and policymakers rely on it for informed decision-making.

Bangladesh's PMI was launched with support from the UK government and is based on monthly surveys of over 500 private sector enterprises across key economic sectors.

The methodology, developed by the Singapore Institute of Purchasing and Materials Management (SIPMM) with technical input from Policy Exchange, uses a diffusion index to aggregate responses on various indicators.

jasimharoon@yahoo.com