An all-encompassing matrix that measures economic situations and scenarios ahead and thus alerts policymakers, businesses and other stakeholders about how to act accordingly is going to be introduced in Bangladesh.
The Purchasing Managers' Index or PMI, a measure of business activity across an economy, is set to be launched in the country early February, organisers said.
Such PMI, available both in Europe and the United States, indicates the prevailing direction of the economic trends mainly in manufacturing and service sectors.
There are value readings between zero and 100 in this matrix. But two values, for example above 50 and below 50, are important. Below 50 indicates the economy is contracting and above 50 means it is expanding. And a median reading at 50 indicates no change. The further away from 50, the greater the level of changes.
Such economic-value gauge compares the situation with the previous month.
The PMI consists of a diffusion index that summarizes whether market conditions are expanding, staying put, or contracting as viewed by purchasing managers.
The purpose of the PMI is to provide information about current and future business conditions and scenarios to company decision-makers, analysts, and investors.
Such indicator is also important for the business journalists for preparing news articles in the proper context.
The Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka, and the Policy Exchange Bangladesh (PEB), with support from the UK Government's Foreign, Commonwealth and Development Office (FCDO), have taken the initiative of introducing the purchasing managers' index for Bangladesh.
It's a leading economic indicator which helps understand the economic health of a country.
"Encompassing key economic sectors such as agricultural, construction, manufacturing, and services, the PMI provides accurate and timely insights on the turning points in the business cycle and captures early trends," MCCI says about merits of the undertaking.
The PMI-collated data are derived from monthly surveys conducted among private-sector enterprises before being consolidated into a composite index.
Bangladesh's upcoming transition from a Least Developed Country (LDC) in 2026 is a key milestone, but it brings significant challenges like the impact of COVID-19, geopolitical shifts, reduced policy freedom, trade-preference erosion, and limited development financing. These factors, combined with its integration into the global market, make the coming years crucial to the nation. A robust strategy is essential for sustainable prosperity, with the PMI playing a critical role by monitoring economic indicators like GDP, trade flow, and inflation to aid government and private sector in decision-making.
MCCI and PEB will jointly organise PMI-launching programme on Monday, 05 February 2024, on the MCCI premises located at Police Plaza Concord in Dhaka.
People familiar with the development told the FE that in the first year it will be quarterly. And from the second year, this will be a monthly one. This is a survey-based index which makes questionnaires on business conditions and any changes, whether they are improving or deteriorating, or have no changes.
The PMI is based on five major survey areas-each of which is weighted equally: new orders, inventory levels, production, supplier deliveries and employment.
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