Bangladesh’s Purchasing Managers’ Index (PMI) saw a notable improvement in August, rising by 6.6 points to 43.5, up from 36.9 in July. This indicates a slower rate of contraction in key economic sectors.

Despite the improvement, the economy remains in contraction, as a PMI reading below 50 signals economic contraction, while a reading above 50 suggests expansion.

The latest PMI report, released on Sunday, highlights the interim government’s ongoing efforts to restore political stability and support business operations following the fall of the Awami League-led regime in early August. The report also noted cautious optimism among businesses about the economic outlook, as the future business index showed expansion across key sectors.

The PMI measures economic activity across four major sectors: agriculture, manufacturing, construction, and services. All sectors remained in contraction in August but at slower rates than in July.

The agriculture sector recorded a contraction for the second consecutive month, but the rate of decline eased, with the PMI reading at 38.7. Although the sector showed slower contractions in new business, business activity, and employment, the backlog of orders turned back into contraction while input costs expanded slowly.

The manufacturing sector also remained in contraction, with a PMI of 47.7, indicating a slower rate of decline. While new orders and factory output contracted more slowly, employment, input purchases, finished goods, and order backlog continued to contract. However, new exports, imports, and supplier deliveries saw a return to expansion.

The construction sector contracted faster in August, with its PMI falling to 40.0. New business and construction activity showed sharper declines, though input costs and order backlogs remained in expansion. The employment index, however, moved back into expansion.

The services sector posted its second consecutive month of contraction, though at a slower rate. New business and business activity experienced a reduced contraction, while the employment index showed a faster rate of decline. Input costs expanded more slowly, and the order backlog index returned to expansion.

The Bangladesh PMI was developed in 2024 through a collaboration between the Metropolitan Chamber of Commerce and Industry (MCCI), Policy Exchange Bangladesh (PEB), and the Singapore Institute of Purchasing & Materials Management (SIPMM), with support from the UK Foreign, Commonwealth, and Development Office (FCDO). The PMI is based on surveys from various businesses across the country, covering 383 items and 749 varieties of food and non-food goods and services.

At a Focus Group Discussion (FGD) held at the MCCI office in Dhaka on Sunday, Hasnat Alam, Senior Manager for Market and Policy Advisory at PEB, presented the latest PMI report. The event was organized by the MCCI in partnership with PEB and supported by FCDO.