B Mirror Report: Bangladesh’s industrial sector posted a notable rebound in the first quarter (Q1) of FY26, propelled by strong performances in construction, mining and manufacturing activities.

Latest data from Bangladesh Bank (BB) show that industrial growth climbed to 6.97 per cent in Q1 of FY26, up sharply from 2.38 per cent in the previous quarter and 3.59 per cent in the same period of the last fiscal year.

The recovery was underpinned by solid expansion in major sub-sectors. Construction led the surge with a 12.41 per cent growth, followed by mining and quarrying at 6.89 per cent and manufacturing at 6.17 per cent.

However, the electricity, gas and water supply segment contracted by 10.7 per cent during the quarter, highlighting ongoing strain in energy and utility services.

The Quantum Index of Industrial Production (QIIP) rose by 6.95 per cent in Q1 of FY26, compared to 1.65 per cent growth in Q1 of FY25 and 3.57 per cent in Q4 of FY25, indicating a steady acceleration in industrial output.

The General Index of Large-Scale Manufacturing (LSM) industries recorded a robust 7.8 per cent growth in Q1 of FY26. This marks a strong turnaround from a 2.9 per cent contraction in Q1 of FY25 and a steep 10.1 per cent decline in Q4 of FY25.

Most manufacturing categories registered significant gains during the quarter, except leather, chemical and machinery products. Motor vehicles and basic metals were the key drivers of LSM growth, expanding by 32.0 per cent and 31.3 per cent, respectively.

The Index of Small, Medium and Micro (SMM) industries also returned to positive growth, rising by 5.6 per cent in Q1 of FY26, compared to a 0.2 per cent decline in the corresponding quarter last year. Pharmaceutical products recorded the highest growth at 48.3 per cent, while leather and tobacco products grew by 20.5 per cent and 20.2 per cent, respectively. However, electrical equipment and motor vehicles posted negative growth within the SMM segment.

Meanwhile, the Cottage Industry Index expanded by 5.7 per cent in Q1 of FY26, higher than the 2.5 per cent growth recorded a year earlier but slightly below the 6.3 per cent growth in Q4 of FY25. In this category, tobacco products saw the strongest expansion at 31.5 per cent, whereas beverage, wood, motor vehicles, paper, and coke and refined petroleum products experienced declines.

Economists say the strong first-quarter performance signals gradual normalization of industrial activities following earlier slowdowns, supported by improved domestic demand and relative macroeconomic stability.

Dr Masrur Reaz, chairman of Policy Exchange Bangladesh, said the rebound in large-scale manufacturing and construction points to a revival of business confidence. “The strong recovery in LSM, particularly in motor vehicles and basic metals, reflects investment and consumer demand,” he noted.

However, he cautioned that sustaining industrial momentum will depend on addressing structural bottlenecks, especially in the energy sector. “The contraction in electricity, gas and water supply is a concern. Without reliable energy and improvements in logistics and financial sector stability, maintaining this pace could prove difficult,” he added.

He further observed that the sharp rise in pharmaceuticals and selected consumer goods highlights resilience in domestically oriented industries, but export-driven and capital-intensive sectors will require policy support to stay competitive.

Analysts believe that if the current trend continues and supply-side constraints are eased, the industrial sector could play a crucial role in boosting overall GDP growth in FY26.