Private-sector activities accelerated sharply in May as the Purchasing Managers' Index (PMI) rose 8.2 points from the previous month to 62.8, according to the PMI released on Monday.
It signifies a faster pace of economic expansion driven by robust growth in manufacturing and services.
PMI above 50 means the economy is in expansion, while below 50 means decline.
A PMI reading of 50 means the economy is in stagnation.
The latest reading also showed the construction sector returning to expansion after three months of contraction, while the agriculture sector maintained growth for the ninth consecutive month, albeit at a slower pace.
The agriculture sector continued to expand, supported by stronger growth in business activities and employment.
However, growth in new business and input costs moderated, while order backlogs contracted during the month.
Manufacturing posted its second consecutive month of expansion and recorded a significantly stronger performance compared with April.
The improvement was driven by faster growth in new orders, export orders, input purchases, and employment.
Factory output and input prices continued to increase, although at a slower pace.
Imports and order backlogs returned to expansion, while contractions in finished goods inventories persisted.
The construction sector returned to growth following three straight months of decline.
New business, construction activity, and employment moved back into the expansionary territory.
Input costs increased at a faster pace, while the growth of order backlogs moderated.
The services sector expanded for the 20th consecutive month, recording faster growth in business activities, employment, and input costs.
New business returned to expansion, although order backlogs contracted at a quicker pace.
Despite the stronger PMI reading, businesses continued to report challenging operating conditions.
The PMI mentioned that respondents cited persistent electricity and energy shortages, rising fuel prices, increasing labour costs, and higher transportation expenses as major constraints on business activities.
Many firms said power disruptions continued to affect productivity and production schedules, while elevated input costs squeezed profit margins.
Several businesses also expressed concern over the potential economic fallout from the ongoing geopolitical tensions in the Middle East, warning of higher fuel prices, supply chain disruptions, and weaker export demand.
Agricultural firms highlighted weather-related uncertainties affecting seed sales and production planning.
Other respondents pointed to imported rice, elevated bank lending rates, and sluggish domestic economic activities as additional concerns.
However, some businesses remained cautiously optimistic, arguing that conditions could improve if energy supplies stabilised, economic activities strengthened, and supportive policies were introduced, particularly for small and medium-sized enterprises (SMEs).
Although the Middle East conflict has continued to raise energy costs, disrupt supply chains, and sustain inflationary pressures, stronger domestic demand and increased business activities ahead of Eid appear to have supported broader-based expansion across major sectors, says Dr M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh.
jasimharoon@yahoo.com