Bangladesh's headline inflation eased marginally to 8.26% in August from 8.32% in July, driven mainly by falling food prices.
However, non-food inflation remained above 9%, while wage growth fell below the inflation rate, putting continued pressure on households' real income and purchasing power.
The findings were highlighted in the Economic Update & Outlook, September 2026, published today (12 October) by the General Economics Division (GED) of the Bangladesh Planning Commission.
According to the report, food inflation fell to 7.02% in August from 7.16% in July.
In contrast, non-food inflation edged up to 9.32% from 9.28% during the same period, widening the gap between food and non-food inflation to more than 2 percentage points.
GED said the marginal decline in headline inflation masked divergent trends in its major components. While food inflation continued to ease, underlying price pressures in non-food items remained persistent.
Falling rice prices provide relief
Falling rice prices were a major contributor to the moderation in food inflation. Overall rice inflation declined further to -7.99% in August from -6.00% in July.
Inflation for medium rice fell to -5.58% from -4.28%, while fine rice inflation dropped to -6.71% from -4.12%. Coarse rice recorded a steeper decline, with inflation falling to -11.83% from -10.19%.
Consequently, rice's negative contribution to food inflation widened to -27.47% in August from -20.25% in July.
GED said the broad-based decline across coarse, medium and fine rice suggested that the easing was not confined to any single category.
However, the report cautioned that sustained rice deflation at these levels warranted close monitoring, as prolonged price declines could affect incentives for rice producers.
Price developments across other food categories remained mixed.
The contribution of fish and dry fish to food inflation rose sharply to 32.37% in August from 24.87% in July. Meat's contribution declined to 13.51% from 14.75%, while fruits' contribution fell to 13.47% from 17.50%.
Vegetables also provided some relief, with their contribution declining to 24.71% from 25.68%.
Onion played a stronger offsetting role, with its negative contribution to food inflation widening to -7.78% from -3.21%.
Wage growth falls below inflation
Despite the slight moderation in inflation, households continued to face pressure on their real purchasing power as wage growth slowed.
Wage growth declined to 8.05% in August from 8.22% in July. With headline inflation at 8.26%, wage growth was 0.21 percentage points below inflation, compared with a gap of 0.10 percentage points in July.
GED said the August figures marked a reversal of the improvement observed in July, when wage growth and inflation had moved closer together.
"As a result, wage-earning households continued to face pressure on their real purchasing power in August," the report said.
The outlook for household purchasing power will depend largely on the relative movements of wages and inflation in the coming months, particularly whether food price moderation continues and elevated non-food inflation begins to ease.
Transport-related cost pressures persist
Transportation cost inflation increased slightly to 9.41% in August from 9.34% in July. Transport services inflation, however, declined to 18.24% from 18.57%.
Inflation in liquid fuels, octane, petrol and diesel remained unchanged, while LPG inflation edged down to 23.97% from 24.03%.
GED said the broadly stable fuel-product inflation indicated that the decline in headline inflation in August was not driven by any significant change in administered or fuel-related prices.
ADP implementation remains sluggish
Bangladesh's Annual Development Programme (ADP) implementation remained sluggish in the first two months of FY2026-27, with the implementation rate falling to 1.85% from 2.39% a year earlier as expenditure on foreign-funded projects dropped sharply.
According to the GED report, total ADP expenditure during July-August of FY2026-27 stood at Tk 5,709.70 crore, marginally lower than the Tk 5,714.83 crore spent during the corresponding period of FY2025-26.
Although expenditure declined by only 0.1% year-on-year, the implementation rate fell more noticeably because of the larger ADP allocation for the current fiscal year.
In August alone, ADP expenditure amounted to Tk 3,588.52 crore, down from Tk 4,070.18 crore in August 2025, representing a year-on-year decline of about 11.8%.
The monthly ADP implementation rate consequently dropped to 1.16% from 1.71% a year earlier.
GED said there was scope to accelerate implementation in the coming months by improving project readiness, procurement, fund release and field-level execution.
Mixed signals from the economy
The September economic update identified several other areas of concern despite signs of improvement in some indicators.
Revenue collection remained below target despite positive year-on-year growth, while ADP expenditure stayed close to last year's level. However, the ADP implementation rate declined and the utilisation of external financing remained weak.
On the external front, foreign exchange reserves recovered in August after declining in July, supported by strong remittance inflows.
Capital machinery imports also increased, potentially signalling an improvement in investment-related activity. However, declining export earnings presented a contrasting picture, pointing to mixed signals from the external sector.
GED also highlighted concerns over the real appreciation of the taka. Despite relatively limited movements in the nominal exchange rate, the stronger real exchange rate could weaken Bangladesh's price competitiveness in international markets.
Overall, the report suggests that while falling food prices have provided some relief from inflation, persistent non-food inflation, slower wage growth and weak private-sector credit expansion continue to pose challenges to household purchasing power and broader economic activity.