The private sector continued to expand in June, albeit at a slower pace, as manufacturing and construction slipped back into contraction, highlighting mounting pressure from higher production costs, weaker demand and seasonal disruptions.
Purchasing Managers' Index (PMI) fell by 9.9 points in June from the previous month to 52.9, signalling slower economic expansion amid mixed performances across key sectors.
The moderation in growth reflected divergent sectoral trends, with manufacturing and construction returning to contraction, while agriculture and services continued to expand, though at a slower pace.
The PMI is jointly developed by the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange Bangladesh (PEB), with support from the UK government and technical assistance from the Singapore Institute of Purchasing & Materials Management (SIPMM).
The index is designed to provide timely insights to help businesses, investors and policymakers make informed decisions.
A PMI reading above 50 indicates economic expansion, while a reading below 50 signals contraction. A score of exactly 50 indicates stagnation.
The agriculture sector recorded its 10th consecutive month of expansion, although growth moderated.
Expansion was recorded in new business, business activity, employment and input costs, while the order backlogs index remained in contraction for the second consecutive month.
The manufacturing sector returned to contraction after two months of expansion.
The weaker performance was driven by declines in new orders, export orders, employment, supplier deliveries and order backlogs.
Although factory output, input purchases and imports continued to expand, their growth slowed. Meanwhile, input prices rose at a faster pace, while the finished goods index returned to expansion.
The services sector expanded for the 21st consecutive month, although growth slowed.
Lower rates of expansion were recorded in new business, business activity, employment and input costs, while order backlogs contracted at a faster pace.
Respondents across Bangladesh's major economic sectors said business conditions remained challenging in June amid rising production costs and weakening market demand.
Many firms reported that higher LPG and fuel prices, increasing transport and operating costs, and rising labour expenses continued to squeeze profit margins.
Several businesses also cited financial constraints, disruption caused by ongoing road construction, and concerns over the recently imposed 15 per cent VAT, which they believe has increased the cost of doing business.
Agricultural respondents highlighted weather-related uncertainties affecting production and seasonal demand, while some firms noted that overall domestic economic activity remained subdued.
Despite these challenges, respondents expressed optimism that improvements in the business environment, stable energy supplies and supportive government policies would help strengthen business confidence and economic activity in the coming months.
"The June PMI suggests Bangladesh's economy remained in expansion, but with clear sectoral divergence," said M. Masrur Reaz, Chairman and Chief Executive Officer of Policy Exchange Bangladesh.
He said agriculture and services continued to expand, albeit more slowly, while manufacturing returned to contraction because of weaker orders, exports, employment and supplier deliveries.
"Construction also contracted amid softer business activity and weaker new orders. The long Eid holidays, the onset of the monsoon and fading pre-Eid demand weighed on business conditions in June," he added.
Jasimharoon@yahoo.com
