Manufacturing PMI signals mild contraction

KARACHI: The HBL Pakistan Manufacturing PMI rose to 49.6 in October from 48 in September yet remained below the 50 neutral threshold for the second consecutive month, indicating a slight deterioration in the sector.

A PMI reading below 50 signals contraction, providing investors with an early indicator of business conditions, demand trends and production activity. The downturn in October was largely driven by subdued demand, with new orders falling for the sixth consecutive month amid inflationary pressures, higher taxes and power loadshedding.

Export orders also declined, contributing to weaker overall demand. Data from the Pakistan Bureau of Statistics (PBS) shows exports contracted 3.9 per cent year-on-year (YoY) in the first quarter of fiscal year 2026, while the central bank has highlighted challenging export prospects given evolving tariff dynamics.

Output fell for a second consecutive month, with employment declining for the fourth month in a row as firms adjusted to lighter workloads. Purchasing activity dropped at the steepest rate in the 18-month series, while input costs and tax burdens kept price pressures elevated, prompting firms to raise output prices at the fastest pace in three months.

Humaira Qamar, head of equities and research at HBL, noted that while short-term headwinds persist, manufacturers maintain a broadly optimistic outlook for output growth over the next 12 months, supported by expectations of easing cost pressures and planned business expansion. Confidence, however, edged down for a fourth consecutive month amid concerns over the pace of inflationary relief.

The central bank recently revised its growth forecast for the fiscal year 2026 to the upper end of a 3.25-4.25 per cent range, which supports expectations of a gradual recovery in manufacturing activity.