HBL PMI: weaker new orders weigh on manufacturing activity

The HBL Pakistan Manufacturing Purchasing Managers' Index (PMI) declined to 50.9 in September, down from 51.8 in August, indicating the slowest expansion in manufacturing activity in three months. The slowdown was attributed to the ongoing effects of Middle East tensions affecting the domestic economy. Demand conditions weakened as new orders fell for the first time since June, driven by high fuel prices and reduced household spending power.

However, export orders continued to grow for the fifth consecutive month. Despite the softer demand, manufacturers boosted purchasing activity at the fastest rate in seven months, aiming to boost inventory levels and avoid potential supply chain issues. Inflationary indicators remained mixed; while input price inflation eased in September, fuel costs remained a major cost burden, leading manufacturers to transfer higher operating expenses to consumers, causing an increase in selling price inflation.

This trend suggested that price pressures might be spreading more widely. With Middle East tensions persisting, global oil and transportation costs remained high, keeping the outlook for inflation on the upside. Humaira Qamar, Head of Equities & Research at HBL, observed that business confidence surged to its highest level in 2026, buoyed by expectations of stronger demand and improved sales.

Nonetheless, the combination of weaker domestic orders and faster selling price growth highlighted the recovery's susceptibility to a prolonged stalemate in US-Iran negotiations. The company believes that the pace of manufacturing activity and the wider economy will continue to be influenced by the Middle East situation, where a lasting resolution remains uncertain.