Bangladesh to launch PMI index to measure economic trends in manufacturing

The Purchasing Managers' Index is used to determine the direction of economic trends in a country's manufacturing and service sectors

Published : 17 Feb 2024, 04:39 PM
Updated : 17 Feb 2024, 04:39 PM

Bangladesh is preparing to launch a Purchasing Managers' Index or PMI to assess the dynamics of the economy more accurately.

The PMI is used to determine the direction of economic trends in a country's manufacturing and service sectors.

Data will be collected from 500 institutions across the country monthly, and following analysis, the PMI index will be released at the start of each month, M Masrur Reaz, the chairman and CEO of Policy Exchange Bangladesh (PEB), announced during a press conference at the Metropolitan Chamber of Commerce and Industry office in Dhaka’s Motijheel on Saturday.

The first PMI index of the country is expected to be published in May.

The MCCI, in collaboration with the private research organisation PEB, will publish the index, and the initiative is supported by the UK government's Foreign, Commonwealth, and Development Office (FCDO).

This index will provide the private sector and the government with an overview of the country's economic performance in the previous month and forecasts for the current month, said Masrur.

He said the PMI index will be compiled using data from four sectors: agriculture, manufacturing, construction, and services.

According to Masrur, the index helps understand how different sectors are doing. “If there's a big change in a sector, it will prompt closer examination by government and policymakers.”

The data released with the PMI index for the month gives a basic idea of whether these four sectors have seen progress or decline, he said.

The index is measured on a scale of 0 to 100, where a PMI above 50 indicates expansion compared to the previous month, while a reading below 50 indicates contraction.

If the index value is 50, it signifies that the economy is in a stagnant state.

Masrur remarked, "If there's a major shift in a sector's data within one month, it will allow us to explore the reasons behind it."

Countries like India, Vietnam, Japan, Indonesia, and others worldwide are publishing the PMI index.

The PEB chairman explained that the process is entirely observational, stating, "The observation will determine if there are any issues in the economy such as a recession or an epidemic."

Farooq Ahmed, secretary general of MCCI, said the PMI index will only observe the economy without conflicting with any of its principles.

He assured that if any issues arise, MCCI will communicate with the government as needed.