Manufacturing Sector in Pakistan Faces Slowdown as New Orders Decline

Karachi: Pakistan’s manufacturing sector experienced a notable deceleration in June, with the HBL Manufacturing Purchasing Managers’ Index (PMI) dropping to a 10-month low of 50.5, compared to 51.1 in May. This decline signals a significant slowdown in manufacturing momentum, driven largely by a decrease in new order volumes.

This marks the first occurrence of consecutive contractions in new orders, compelling manufacturers to adjust by reducing both employment levels and input procurement. Despite these challenges, the export sector showed encouraging signs of recovery.

Humaira Qamar, Head Equities and Research at HBL, noted, “After hitting a 10-month low last month, exports showed signs of revival. New export orders rose for the first time in three months, with manufacturers attributing the rebound to improved quality standards.”

Additionally, manufacturers reported improved management over their workloads, with work backlogs declining for the sixth consecutive month, further highlighting the ongoing softness in demand.

Looking towards the future, there remains cautious optimism. The Future Output Index continues to trend positively, indicating expectations of stronger activity in the coming year. However, sentiment has dipped for the second consecutive month due to concerns over rising taxation and geopolitical uncertainties.

Qamar further emphasized that current PMI levels suggest a slower GDP growth rate than initially estimated by the Pakistan Bureau of Statistics (PBS). “We believe the current PMI readings imply a GDP growth rate lower than the provisionally estimated 2.7% for FY25, seeing potential for downward revisions,” she stated. Moreover, the Ministry of Finance’s projection of a 4.2% GDP growth for FY26 appears optimistic, raising concerns about potential revenue shortfalls.