The HBL Pakistan Manufacturing Purchasing Managers’ Index (PMI) increased slightly to 51.8 in August 2026 from 51.7 in July, reaching its highest level since the onset of the war. While the latest reading indicates that the manufacturing sector continued to expand, the pace of growth remained modest. The improvement was supported by stronger domestic orders and continued growth in export demand, pointing to improving underlying demand conditions for manufacturers during the month.
New orders recorded their fastest expansion in five months, reflecting improvements in product quality and competitive pricing strategies adopted by manufacturers. The increase in new orders provided additional support to overall manufacturing activity and indicated stronger demand from customers in the domestic market. At the same time, export orders strengthened for the fourth consecutive month, demonstrating continued resilience in external demand. The sustained improvement in export orders provided another source of support for manufacturers and contributed to the broader improvement in sector conditions during August.
The stronger order environment also helped maintain manufacturing output during the month. Production increased at a pace broadly similar to July, suggesting that manufacturers continued responding to improved demand while remaining cautious about expanding capacity. Lingering inflationary pressures remained a consideration for producers, limiting the pace at which some businesses were willing to scale up production. The combination of stronger orders and continued cost pressures resulted in manufacturers maintaining a measured approach toward increasing their output.
Manufacturers also increased purchasing activity for the third consecutive month as businesses prepared for potentially stronger demand in the period ahead. The increase in purchasing was accompanied by continued inventory building, indicating that companies were taking steps to ensure adequate supplies as order volumes improved. The trend suggests that manufacturers were positioning themselves for sustained demand while keeping production and procurement decisions aligned with prevailing market conditions.
Employment levels remained largely unchanged in August, as companies balanced the need to respond to higher order volumes with continued cost-management measures. Selective hiring took place in some areas to address increased demand, but this was offset by efforts to control operating expenses. As a result, overall employment across the manufacturing sector remained broadly stable during the month despite the improvement in orders and business activity.
Supply chain conditions showed further improvement, with delivery delays easing to their lowest level since November 2025. The improvement in supplier delivery times indicates that manufacturers experienced fewer disruptions in obtaining required inputs and materials. Better supply conditions provided additional support to production activity and inventory management, allowing businesses to respond more effectively to changes in demand. The improvement also marks a notable shift from periods when supply constraints and delivery delays placed greater pressure on manufacturing operations.
Business confidence regarding output over the next 12 months also strengthened in August, reaching one of the highest levels recorded this year. Humaira Qamar, Head of Equities & Research at HBL, said the stronger outlook was supported by expectations of sustained sales growth and a moderation in price pressures. Her assessment indicates that businesses are becoming more positive about future activity as demand conditions improve and inflationary pressures are expected to ease.
Qamar noted that inflation is expected to moderate through the second half of FY27, although the disinflationary process is likely to be more gradual and less pronounced than previously anticipated. The outlook highlights the balance facing manufacturers, with improving orders, stronger export demand and better supply chain conditions supporting activity, while inflation and cost pressures continue to influence decisions on production, hiring and investment.
Overall, the August PMI reading indicates that Pakistan’s manufacturing sector maintained its expansion for another month, with the headline index rising to 51.8. Stronger domestic orders, four consecutive months of improving export orders, increased purchasing activity and improved supplier delivery times provided support to the sector. At the same time, stable employment and cautious production decisions reflected continued attention to costs and inflation. The improvement in business confidence suggests manufacturers are increasingly expecting stronger activity ahead, although the pace of expansion remains dependent on demand conditions and the trajectory of inflation.
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