Pakistan’s manufacturing sector gathered pace in February 2026, with the HBL Pakistan Manufacturing PMI rising to 53.6 from 51.8 in January, marking the strongest reading in a year. The latest data signals a broad-based improvement in industrial activity, as stronger demand conditions translated into higher output, increased hiring, and renewed inventory accumulation.
The upturn was primarily driven by a sharp acceleration in new orders, which expanded at their fastest rate in 11 months. Firms attributed the rise in sales to improvements in product standards and continued efforts to maintain competitive pricing strategies in both domestic and international markets. The stronger inflow of new business provided a foundation for sustained production gains during the month.
Export demand also contributed to the improvement, recording its most significant expansion in close to a year. Healthier global economic conditions supported external orders, allowing manufacturers to benefit from stronger overseas interest. The rebound in exports reinforced the broader recovery in industrial sentiment and added momentum to overall order books.
In response to higher demand, production increased at its quickest pace since November. Companies scaled up output to meet rising workloads, reflecting improved operational throughput across the manufacturing landscape. Businesses also moved to rebuild stock levels, with inventories of finished goods rising for the third time in four months. The replenishment of inventories suggests that firms are positioning for sustained order flows in the near term.
Employment conditions strengthened notably during February. Rising workloads and capacity requirements encouraged firms to expand their workforce, leading to the strongest employment growth since the survey’s inception in May 2024. The increase in hiring highlights the direct link between improved order volumes and labor demand within the manufacturing sector.
Despite the positive momentum in activity indicators, cost pressures intensified. Input prices climbed at their fastest rate in over a year, largely driven by higher raw material expenses. The acceleration in input costs added strain to margins, prompting manufacturers to adjust their pricing strategies. Selling prices were raised at the sharpest pace in 18 months as firms sought to offset both higher input costs and tax-related pressures.
Commenting on the survey findings, Kumail Chevelwalla, Team Lead Equities & Research at HBL Bank, noted that inflation expectations appear to be gaining traction. He indicated that the visibility of rising cost pressures strengthens the case for the Monetary Policy Committee to maintain interest rates at its upcoming March meeting.
While firms remain generally optimistic about output growth over the next 12 months, overall confidence has declined to its lowest level on record. Businesses cited tariff-related challenges and a heavy tax burden as key factors weighing on sentiment. Concerns surrounding U.S. trade policy continue to create uncertainty, although reports of ongoing engagement with the IMF on potential tax relief in the upcoming budget have introduced cautious optimism into the outlook.
Overall, February’s PMI reading reflects expanding manufacturing activity, stronger export demand, and elevated cost pressures, presenting a complex environment of growth momentum paired with rising inflationary signals.
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