Karachi, 02 February 2026:

The HBL Pakistan Manufacturing PMI eased to 51.8 in January, down slightly from 52.8 in the previous month, but still above the 50.0 neutral mark for the third consecutive month. This indicates that operating conditions continued to improve, though at a more moderate pace.

A key driver of the slowdown was softer growth in new orders. Importantly, this appears less related to domestic demand and more to supply‑side constraints. Manufacturers highlighted that higher electricity costs and ongoing load shedding limited their ability to accept or process additional orders. On the external front, foreign demand remains under pressure. New export orders fell for the sixth time in seven months, as shifting U.S. trade tariffs increasingly benefit competing countries.

Despite these challenges, output expanded modestly, though it was held back by inflationary pressures and adverse weather that disrupted operations. With order books thinning, firms continued to reduce backlogs, while employment levels remained broadly stable. Finished goods inventories declined for the first time in three months, as companies turned to existing stock to meet sales amid power constraints that curbed production.

Kumail Chevelwalla, Team Lead, Equities & Research, commented on the latest release, “Despite trending above 50.0, the Future Output Index fell to the lowest on record since the Index was launched in May 2024, reflecting concerns over tariffs and persistent inflation. We believe that growth is expected to be driven primarily by domestic demand, with external markets offering limited support. The central bank upgraded its GDP growth forecast to the 3.75%-4.75% range, citing stronger than expected economic activity, particularly in the manufacturing sector while simultaneously flagging risks of a challenging export environment, projecting them to decline 6% in fiscal year 2026.“