Economy dips in April due to slow services, construction: Purchasing Managers’ Index

The overall pace of business in Bangladesh decreased by 2.1 points in April compared to the previous month, according to the Purchasing Managers' Index (PMI). 

The report said the economy slowed in April as key sectors such as services and construction slowed, but the rapid growth of the agriculture and manufacturing sectors offset much of this loss.

The PMI, a survey-based index released for the first time in Bangladesh to determine the dynamics of the economy, shows that business growth fell to 62.2 points in April from 64.3 in March.

The Metropolitan Chamber of Commerce and Industry (MCCI), in partnership with Policy Exchange Bangladesh (PEB) and with support from the UK's Foreign, Commonwealth, and Development Office (FCDO), launched the PMI results at the MCCI's Gulshan office on Thursday (9 May).

The report covers four sectors – service, manufacturing, agriculture, and construction.

In March, the service sector PMI was 63.6 but dropped to 56.2 in April, while the construction sector PMI decreased from 67.7 in March to 63.8 in April.

However, manufacturing and agriculture showed quicker expansion. The agriculture sector had a PMI of 55.7 in March, which increased to 60.9 in April, and the manufacturing sector's index was 68.4 in March, increasing to 74.5 in April.

The PMI is a leading economic indicator that helps understand the economic health of a country, providing insights into key economic sectors and capturing early trends. Many advanced and developing economies regularly use PMI reports to track shifts in the business cycle and economic variables. 

A PMI score above 50 suggests expansion, while values below depict contraction within a particular sector. 

"Despite a small decrease from the previous month, the economy remains on the expansion track with the new quarter. Robust growth was recorded for both the manufacturing and agriculture sectors, whereas the services and construction sectors posted slower growth," according to the PMI findings.

Presenting the PMI report, M Masrur Reaz, chairman of PEB, said it is good that the decline is slight and the index is above 50 points.

However, the most important thing is to maintain its continuity, he added.

Reaz further said the PMI will be published on the 7th of every month. "We published the report after talking to about 500 traders."

He also said, through the index, the policy makers in the government will understand which direction should be looked at. In the same way, the private sector will get an idea of ​​how strong the wheel of the economy is.

Findings of the report 

The latest PMI reading was attributed to a slower expansion rate in key sectors such as services and construction, offset by a faster expansion rate in sectors like agriculture and manufacturing. 

The agriculture sector marked its fourth consecutive month of expansion following a contraction reading in December last year. 

It showed a swiffer expansion rate for indexes such as new business, business activity, and input costs but a slower expansion rate for the order backlog index. 

The manufacturing sector posted a faster expansion rate across various indexes, including new orders, new exports, factory output, input purchases, and supplier deliveries. 

The services sector recorded a slower expansion rate for indexes such as new business, business activity, employment, and input costs. 

State Minister for Finance Waseqa Ayesha Khan, in her speech at the event, said the index is certainly good. It will be helpful in making investment decisions. 

"However, it is important to have transparency in the collection and disclosure of information," she added.

Matt Cannell, British deputy high commissioner to Bangladesh said, Bangladesh will face some challenges after transitioning from LDC. 

"But there are many possibilities. Such indicators will play a positive role in making investment decisions," he added.

The Singapore Institute of Purchasing and Materials Management (Sipmm) assisted in the formulation of this index. Its Executive Director Stephen Poh said the Singapore PMI was created in 1998, and the institute releases it every month. 

"It has become an important indicator of Singapore's manufacturing economy, sought after by local and international news agencies, banks, and investment firms," said Poh. 

MCCI President Kamran T Rahman highlighted the significance of the PMI, especially as Bangladesh navigates challenges like the pandemic and geopolitical tensions on its path to LDC graduation. 

"Despite these hurdles, the PMI report will continue to play a crucial role in guiding timely and well-informed decisions, supporting the country's ongoing progress," said the business leader