Karachi: The HBL Pakistan Manufacturing PMI has shown a slight decline, dropping to 50.1 in August from 50.5 in July, marking the lowest point since the inception of the series. Developed by S and P Global, the index provides an early indication of industrial activity, highlighting nearly stagnant operating conditions last month. The decline in new orders, persisting for the fourth month, is attributed by firms to inflationary pressures and frequent load shedding.

Export orders have also faced a downturn, contracting at the steepest pace recorded in the series. Companies have cited waning global demand and the effects of U.S. tariffs as key factors. Although factory output saw an increase, the growth was primarily due to the fulfillment of existing orders.

The diminished demand is impacting the labor market as companies reduced employment for the third consecutive month, marking the most significant reduction in a year. Cost control measures were cited as reasons for the staffing cutbacks. Additionally, raw material inventories fell for the first time in three months, indicative of reduced input purchasing amid softer demand. Concurrently, delivery times have lengthened, exacerbated by rising transportation costs and disruptions from flooding.

Humaira Qamar, Head of Equities and Research at HBL, commented on the report:

“Despite the subdued environment, business optimism remained slightly positive, though weaker than in July. Confidence was buoyed by anticipated business expansion, new product launches, and hopes for relief from cost pressures. However, the survey largely predates the recent floods in the North, which raises concerns about renewed price pressures. Businesses may encounter further logistical challenges and increased costs. Considering the emerging inflationary threats, it’s likely that the State Bank of Pakistan will maintain the Policy Rate at 11.0% during its September Monetary Policy Committee meeting.”