Pakistan’s Manufacturing Sector Growth Slows in April

The expansion of Pakistan’s manufacturing sector experienced a slowdown in April, reaching a seven-month low. According to a press release, the HBL Pakistan Manufacturing Purchasing Managers’ Index (PMI) decreased to 51.9 from 52.7 in March, primarily due to concerns regarding global trade.

Humaira Qamar, Head of Equities & Research at HBL, suggested that this recent downturn in the index indicates the consequences of trade tariffs imposed by the U.S.

Qamar stated, “We consider the recent PMI declines as initial signals of the difficulties encountered by the global economy as a result of the introduction of U.S. tariffs.”

New orders witnessed a decline, with a notable drop in export orders specifically. Additionally, firms reduced their workforce for the second consecutive month in an attempt to lower expenses, as noted by Qamar.

Qamar cautioned that any potential U.S. stagflation could adversely impact Pakistan’s exports, especially to the U.S., which constitutes 18% of Pakistan’s total exports. This situation could potentially extend the manufacturing downturn, although reduced commodity prices might provide some relief, she added.

Despite the deceleration, the PMI figure remains above 50, signifying ongoing expansion supported by a positive inflation outlook.

Qamar anticipates a reduction in interest rates, attributing this expectation to significant deflationary pressures. However, a poll indicates that the State Bank of Pakistan is expected to maintain rates at a steady 12%, following a surprising pause during its previous meeting, which was influenced by geopolitical uncertainties and inflation concerns.

Pakistan’s annual inflation rate decreased to 0.3% in April, notably lower than the Ministry of Finance’s projected range of 1.5% to 2%. The central bank has forecasted an average inflation rate between 5.5% and 7.5% for the fiscal year ending in June.

HBL, in collaboration with S&P Global, a global provider of financial information and analytics, introduced the index in February to monitor Pakistan’s manufacturing sector.