The HBL Pakistan Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, slipped to 50.1 in August from 50.5 in July, marking the lowest reading since the index was introduced. The figure indicates a near-stagnant performance in Pakistan’s manufacturing sector, reflecting subdued operating conditions and a combination of domestic and global headwinds weighing on industrial activity.
The PMI serves as a leading indicator of economic health in the manufacturing sector. Any figure above 50 reflects expansion, while below 50 signals contraction. August’s reading only just hovered above the threshold, pointing to fragile momentum. New orders fell for the fourth month in a row, with companies attributing the decline to persistent inflationary pressures and recurring electricity load shedding.
Export demand was hit particularly hard. Orders from overseas contracted at the sharpest pace in the series’ history, with manufacturers pointing to weakening global demand and the drag of U.S. tariffs as major factors. Although factory output rose at the fastest pace in three months, industry sources noted that the increase was largely linked to the completion of backlogged orders rather than a surge in fresh demand.
Employment trends reflected this cautious outlook. For the third consecutive month, firms reduced staff numbers, with August recording the steepest decline in a year. Businesses explained that the cuts were linked to cost control measures amid falling demand and higher operational expenses. Similarly, raw material inventories declined for the first time in three months, as companies scaled back input purchases against the backdrop of muted order flows.
Supply-side challenges also persisted. Delivery times lengthened further in August, driven by elevated transportation costs and disruptions caused by widespread flooding across the country. The floods not only delayed supply chains but also threatened to push input costs higher, adding another layer of risk for manufacturers already struggling with thin margins.
Commenting on the findings, Humaira Qamar, Head of Equities and Research at HBL, said that while business confidence remained slightly positive in August, it had weakened compared to July. Optimism, she noted, was linked to expectations of business expansion, the introduction of new products, and hopes for easing cost pressures. However, she cautioned that the PMI survey was conducted prior to the recent severe flooding in northern Pakistan.
“Businesses are likely to face renewed stress from logistical disruptions and higher costs. The floods raise concerns of another wave of price pressures, and this environment may push the State Bank of Pakistan to hold its policy rate at 11.0 percent in the upcoming September Monetary Policy Committee meeting,” she added.
The PMI results underscore the delicate balance facing Pakistan’s manufacturing sector. While output is holding steady, weak demand, fragile export performance, and persistent cost challenges suggest that sustaining momentum will remain difficult without targeted policy support and relief from inflationary shocks.
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