Pakistan’s manufacturing sector showed signs of slowdown in April 2026, as the HBL Manufacturing PMI dropped to 49.9, down from 52.9 in March. This marks the first contraction in activity since October 2025, when floods had disrupted industrial operations.
The latest reading indicates emerging stagflationary pressures, largely linked to rising costs and uncertainty stemming from tensions in the Middle East. Manufacturing activity weakened across key areas, with both output and new orders declining for the first time in six months. Businesses attributed the slowdown mainly to higher raw material prices, particularly fuel, influenced by the US-Iran tensions.
Export demand also softened, with new export orders falling slightly after three months of growth. While some manufacturers reported improved orders due to better product quality, these gains were offset by disruptions in key international markets affected by geopolitical instability.
The decline in demand led to reduced hiring and a noticeable drop in work backlogs. Inventory levels also fell sharply—the fastest decline recorded in the series—as companies relied on existing stock to meet orders instead of increasing production.
Rising fuel prices have added to inflationary pressure across the sector. Input costs reached record highs, forcing manufacturers to raise selling prices at the fastest pace in nearly two years.
Commenting on the situation, Kumail Chevelwalla of HBL noted that business confidence has weakened significantly due to ongoing uncertainty. He pointed out that expectations for future output have dropped to record lows, reflecting concerns over the duration of the conflict and persistent inflation.
In response to these pressures, the State Bank of Pakistan recently increased the policy rate to 11.5%, signaling a proactive approach to managing inflation risks and stabilizing the economy amid a potentially prolonged period of high energy costs.
