HBL Pakistan Manufacturing Index Holds Steady as Business Confidence Climbs

Karachi: The HBL Pakistan Manufacturing Index (PMI) remained steady at 50.5 in July, sustaining the modest expansion observed in June, which was a 10-month low. Compiled by S and P Global, the PMI serves as a key economic indicator for analysts assessing Pakistan’s economic health.

In July, factory output experienced a slight uptick, mainly due to the completion of existing orders. However, new orders declined for the third consecutive month, as survey respondents cited rising costs of raw materials, energy, and taxes as contributing factors.

The decrease in fresh export orders added to the downward trend, marking the third decline in four months. This aligns with data from the State Bank of Pakistan, showing a 9% quarter-on-quarter drop in exports in the second quarter. Manufacturers attributed this to subdued global demand and increased tax burdens.

Work backlogs diminished more rapidly and have been on the decline for seven consecutive months, driven by weak demand and the completion of existing orders. Consequently, employment contracted for the second month in a row, as firms reduced staff in response to lighter workloads and cost management efforts.

Kumail Chevelwalla, Team Lead for Equities and Research at HBL, remarked on the PMI’s findings, noting an increase in business confidence to a three-month high. He attributed this to optimism about improving macroeconomic and geopolitical conditions, along with expansion initiatives and new product launches. Despite the monetary easing cycle that began more than four quarters ago, the expected benefits of policy rate cuts have yet to materialize in the industrial sector, with large-scale manufacturing contracting by 1.2% during the first eleven months of fiscal year 2025. Chevelwalla expressed optimism that strong business confidence, further rate reductions, and increased consumer spending power will positively impact the real economy in the medium term.