Bangladesh’s economic expansion slowed in June as the country’s Purchasing Managers’ Index (PMI) fell by 9.9 points to 52.9, with the manufacturing and construction sectors slipping back into contraction amid weaker demand, rising production costs and subdued market conditions, according to the latest PMI report released on June 7.

The Bangladesh PMI, jointly published by the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka and Policy Exchange Bangladesh (PEB), showed that while the overall economy remained in expansion territory, growth moderated significantly from May due to mixed sectoral performance.

The index was developed by MCCI and Policy Exchange with support from the UK Government and technical assistance from the Singapore Institute of Purchasing & Materials Management (SIPMM).

The report said the agriculture sector recorded its tenth consecutive month of expansion, although growth slowed.

New business, business activity, employment and input costs all remained in expansion, while order backlogs contracted for a second straight month.

The manufacturing sector returned to contraction after two months of growth. The decline was driven by weaker new orders, export orders, employment, supplier deliveries and order backlogs.

Although factory output, input purchases and imports continued to expand, they did so at a slower pace. Input prices accelerated, while the finished goods index returned to expansion.

The construction sector also slipped back into contraction after expanding in May. New business, construction activity and employment all declined, while input costs and order backlogs continued to rise at a faster pace.

Meanwhile, the services sector expanded for the 21st consecutive month, although growth eased.

New business, business activity, employment and input costs all recorded slower rates of expansion, while order backlogs contracted at a faster pace.

Businesses surveyed across the country’s major economic sectors said operating conditions remained challenging in June.

Respondents cited higher LPG and fuel prices, rising transport and labour costs, and increased operating expenses as key factors squeezing profit margins.

Many firms also pointed to financial constraints, disruption caused by ongoing road construction projects and concerns that the recently imposed 15 per cent VAT had increased the cost of doing business.

Agricultural businesses highlighted weather-related uncertainties and seasonal demand fluctuations, while some respondents said broader domestic economic activity remained subdued.

Despite these challenges, businesses expressed cautious optimism that improvements in the business environment, stable energy supplies and supportive government policies would strengthen confidence and economic activity in the coming months.

The report’s Future Business Index pointed to continued expansion in agriculture, construction and services, while manufacturing is expected to return to growth, suggesting businesses remain cautiously optimistic about future conditions.

Commenting on the findings, Policy Exchange Bangladesh Chairman M Masrur Reaz said the June PMI reflected continued economic expansion but highlighted growing divergence across sectors.

‘The June PMI suggests Bangladesh’s economy remained in expansion, but with clear sectoral divergence,’ he said, adding that manufacturing weakened on softer orders, exports, employment and supplier deliveries, while construction also contracted amid slower activity.

He attributed the weaker June performance to the extended Eid holidays, the onset of the monsoon season and fading pre-Eid demand.