January 02, 2026 (MLN): Pakistan’s manufacturing sector showed renewed strength in December as the HBL Pakistan Manufacturing PMI, compiled by S&P Global, rose to 52.8 from 52.3 in November, marking its strongest reading since February. The latest data points to a broad-based improvement in manufacturing conditions, supported by rising production levels, stronger demand, and improving business sentiment.
The increase in the PMI reflects solid growth in output, as manufacturers responded to an acceleration in new orders. According to survey respondents, new orders expanded at their fastest pace since March, underpinned by business expansion, improved product quality, and firmer demand conditions in the domestic market. The pickup in order inflows suggests growing confidence among buyers and a gradual normalization of industrial activity.
A notable development in December was the return to growth in new export orders for the first time in six months. Firms reported that stronger international demand and improved product standards helped revive export activity, indicating a potential improvement in Pakistan’s external competitiveness. This recovery in export orders comes amid easing global headwinds and better alignment of local manufacturers with international quality requirements.
Despite higher output and rising order volumes, capacity pressures remained contained. Work backlogs declined at one of the sharpest rates on record, signaling that firms were largely able to meet demand without facing significant operational strain. Improved efficiency and better production planning were cited as key factors behind the sharp reduction in outstanding work.
Employment in the manufacturing sector increased for the second consecutive month, reflecting cautious optimism about near-term demand prospects. Companies reported adding staff and extending working hours to cope with heavier workloads and to prepare for expected growth in new orders. While hiring remained measured, the sustained increase in employment indicates improving confidence across the sector.
Input purchasing activity also strengthened during the month, with manufacturers increasing raw material purchases. Many firms chose to build inventories to protect against possible future price increases and supply uncertainties. As a result, raw material stocks recorded their largest rise since the PMI survey began, pointing to expectations of continued production growth in the coming months.
Commenting on the data, Humaira Qamar, Head of Equities & Research at HBL, said business confidence reached its highest level since July, supported by expectations of improved economic conditions and easing inflationary pressures. She noted that this optimism was echoed in the State Bank of Pakistan’s latest monetary policy decision, which surprised markets with a 50 basis point cut in the policy rate.
According to Qamar, the rate cut signaled the central bank’s confidence in inflation averaging within the 5 to 7 percent range and in achieving its foreign exchange reserve target by June 2026. Lower borrowing costs are expected to further support industrial activity and investment.
The PMI is based on monthly surveys of private sector manufacturing firms and tracks changes in output, new orders, employment, and inventories. For investors and policymakers, it serves as a leading indicator of economic momentum, often providing early signals of shifts in the broader business cycle.
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