June PMI drops to 52.9 amid manufacturing, construction contractions

Bangladesh's economic expansion slowed down in June as the country's overall Purchasing Managers' Index (PMI) plummeted by 9.9 points from the previous month to reach 52.9, driven by manufacturing and construction sectors slipping back into contraction.

The June report, jointly released yesterday (7 July) by the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, and Policy Exchange Bangladesh (PEB), highlighted sectoral divergence. While the agriculture and services sectors managed to sustain their growth at a moderate pace, long Eid holidays, the onset of the monsoon, and fading pre-Eid demand heavily weighed down overall business conditions. According to the report, the manufacturing sector returned to contraction after just two months of expansion, suffered by declines in new orders, new exports, employment, supplier deliveries, and order backlogs, according to a press release.

Factory output and imports grew at a slower rate, while input prices accelerated. Similarly, the construction sector reverted to a contraction after expanding in May, experiencing drops in new business, construction activity, and employment, even though input costs and order backlogs expanded faster. In contrast, the agriculture sector marked its tenth consecutive month of expansion, and the services sector extended its growth streak to 21 months, though both moved at a slower pace.

Looking ahead, the Future Business Index indicates cautious optimism, with expectations of continued expansion in agriculture, construction, and services, alongside a projected recovery in manufacturing. However, respondents across Bangladesh's major economic sectors reported that business conditions in June this year remained challenging amid rising production costs and weaker market conditions.

Many firms surveyed, indicated that higher gas and fuel prices, increasing transportation and operating costs, and rising labour expenses continued to squeeze profit margins, adds the release. Businesses also flagged financial constraints, disruptions from ongoing road construction, and concerns over the recently imposed 15% VAT, which they noted has increased the cost of doing business.

Agricultural respondents emphasized weather-related uncertainties affecting production and seasonal demand, while some firms noted that local economic activity remained subdued. Despite these challenges, the release noted that respondents expressed hope that improvements in the overall business environment, stable energy supplies, and supportive government policies would help strengthen business confidence and economic activity in the coming months.

Several respondents also recommended maintaining a representative and high-quality respondent panel to further enhance the reliability of the Bangladesh PMI.