Businesses back to expansionary track after 3 months, manufacturing takes the lead

Businesses have marked a return to the expansionary track in October for the first time in three months with the manufacturing sector recording a faster rate of recovery from contractions since the student-led mass uprising in July this year.

Agriculture, construction, and service sectors also posted expansion – though at slower rates than manufacturing, as reflected in the latest Purchasing Managers Index (PMI) reading jointly released on Thursday by the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange Bangladesh.

"Despite all key sectors of the economy posting expansion readings, the country continues to grapple with domestic challenges such as frequent protests, sluggish improvements in law and order, and a slowdown in public administration," reads a press release.

PMI is an economic indicator that helps understand how the economy is doing, summarising sectors' performances on a monthly basis. 

An index above 50 signals expansion, while a figure below 50 suggests contraction. The PMI can be viewed as a leading indicator for understanding the growth of a sector or the overall economy relative to the previous month.

Though it has not yet reached pre-July level, the latest PMI rose to 56 in October, up by 6 points from the previous month, giving early indications of expansion across the economic sectors. 

The manufacturing sector recorded a faster rate of expansion, posting expansion readings for the indexes of new orders, new exports, factory output, input purchases, and input prices. Contraction readings were recorded for the indexes of finished goods, imports, employment, supplier deliveries, and order backlogs.

Businesses in the country also agree with the report's findings.

"Our supply chain faced disruptions last July and August. However, since September, it has started to regain momentum, though it hasn't yet reached the expected level," Zaved Akhter, managing director and CEO of Unilever, one of the country's largest fast-moving consumer goods companies, told The Business Standard.

He emphasised the need to restore law and order, noting, "The law-and-order situation has improved compared to previous months, but it is not yet fully stable."

"Some industries are still impacted by incidents of vandalism. Without complete stability in law and order, it will be difficult to restore full business confidence," Zaved, who is also president of the Foreign Investors Chamber of Commerce and Industry (FICCI), added.

He, however, expressed optimism, saying, "I am hopeful that, as law and order continues to improve, business confidence will grow accordingly."

The agriculture sector reverted to expansion after three months of consecutive contractions, posting growth in new business and business activity, whereas employment continued to contract at a faster rate.

The input costs index showed a faster expansion, while the order backlogs index showed a slower contraction.

The services sector also returned to expansion after three consecutive months of contractions. The sector recorded its first-time expansion for the indexes of business activity and order backlogs. The new business index posted a slower expansion, while the input costs index showed a faster expansion. The employment index recorded a slower contraction.

The construction sector, however, saw only marginal expansion after three consecutive months of contraction. The sector posted slower contraction readings for the indexes of construction activity, employment, and order backlogs, though the new business index recorded a marginal contraction. The input costs index showed a faster rate of expansion.

In terms of the future business index, all key sectors – agriculture, manufacturing, construction, and services – recorded slower expansion rates.