Pakistan Purchasing Managers Index (PMI) Points to Growth in Manufacturing

[Riaz Haq]

Pakistan Purchasing Managers Index (PMI), jointly launched by Habib Bank (HBL) and S&P Global, is showing sustained growth in manufacturing for the last several months.  It has been consistently above 50, indicating expansion. This indicator disagrees with contraction reported by Pakistan Bureau and Statistics (PBS) Large Scale Manufacturing (LSM) indicator. What accounts for this discrepancy? Is it because the LSM tracks only a subset of industries tracked by PMI? Is there a difference in methodology? 

Pakistan PMI Trend. Source: S&P Global

Here's one plausible explanation offered by analyst Humaira Qamar at HBL: "As per the Pakistan Bureau of Statistics, Large scale manufacturing (LSM) contracted 1.8% in the latter half of 2024. However, excluding the hefty decline in the low-weight furniture segment, LSM trended positively. Our PMI release suggests that the recovery has extended into 2025, with demand-side conditions taking cue from a sharp reduction in the policy rate". 

Another possible explanation for the discrepancy between PMI and LSM can be seen in the fact that power generation for the grid, a key component of the LSM indicator, is in constant and substantial decline. However, the power generation data tracked by PBS excludes rapidly rising solar electricity production by consumers, including industrial consumers in the country.  Pakistan's grid-connected electricity production and electricity consumption are given as around 110 TWh for 2024, but appear to be declining compared to 2023, which contradicts expectations of increasing demand, but could be a sign of the massive expansion of solar energy, according to an article in PV magazine titled  ‘The Solar Blitz’: How crisis-ridden Pakistan is leading the world on the ‘Solar March’.  Based on rather imprecise Chinese solar panel export figures and extensive satellite imagery, Bloomberg energy analyst Jenny Chase has concluded that rapid solar expansion in Pakistan is real. 

In August 2024, Chase tweeted as follows: "Pakistan's energy regulator, NEPRA, notes that power consumption is down 9.1% year on year in 2023. NEPRA attributes the drop mainly to high power prices cutting economic activity and making residential consumers curb consumption, with rooftop solar only a third factor. But NEPRA doesn't know how much solar the country has, either. We think it has about 12.7GW of solar already (compared with 50GW on-grid power capacity) and will add 10-15GW of solar in 2024". 

In addition to the decline in grid power generation, the reported drag in LSM growth is primarily due to a few low-weight sub-sectors, which have more than offset positive momentum in key sub-sectors such as textiles, pharmaceuticals, automobiles, and POL (petroleum, oils and lubricants), according to the State Bank of Pakistan, as reported by the Express Tribune. 

Pakistan Manufacturing Orders, Output and Employment. Source: S&P Global

High-frequency data like monthly PMI help in gauging real time economic activity in terms of orders, output and employment in the manufacturing sector. Here's an excerpt of the HBL/S&P Global PMI report for February 2025 published in March:

Manufacturers in Pakistan also responded to strengthened operating conditions by raising their staffing levels in February, marking the second increase in as many months. Several firms commented that they required additional capacity in response to higher production requirements, while others mentioned longer operating hours. Increased capacity allowed firms to stay on top of outstanding business in February, as indicated by a sustained and steeper fall in backlogs of work. The latest depletion was the most pronounced in five months. Finally, companies expressed confidence in the future path for output during February, with optimism remaining marked overall. This optimism was underpinned by hopes for further new product launches and improvements in product quality, alongside expectations of softer price pressures.

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[Riaz Haq]

Pakistan manufacturing growth eases in March

https://www.thenews.com.pk/print/1297635-pakistan-manufacturing-gro...

KARACHI: The HBL Pakistan Manufacturing PMI, compiled by S&P Global, posted a reading of 52.7 in March, down from 54 in the previous month, a statement said on Thursday.A figure above 50 denotes an expansion in activity and below it signifies a contraction.

Humaira Qamar – Head of Equities & Research stated “This was the lowest reading since September 24 but remained within the expansion territory. The pace of expansion slowed due to a softer rise in New Orders and Manufacturing Output. New orders and output grew at a slower rate but remained robust, flashing early signs of demand resilience in the economy”

The latest expansion in new orders is driven not only by a recovery in domestic demand but also by rising foreign demand for Pakistani goods. New export orders expanded for the seventh consecutive month and firms credited this to improved quality standards.

Qamar pointed out that the recent dip in goods exports is not concerning. “The recent broad-based decline in goods exports observed in February appears transitory and this was most likely attributable to the fewer number of days during the month.”

The March PMI release comes a week after the latest GDP statistics from PBS. The core advantage of the PMI is its ability to provide up-to-date, accurate and often unique monthly indicators of economic trends while GDP is quarterly and typically lags by a period of 3-5 months.

She acknowledged that GDP growth remains on the weaker side but there are early signs of growth returning and the sector’s outlook remains positive. Her optimism is shared by the survey participants.

“Despite weaker hard data, with PBS recently reporting a 0.2 per cent contraction in industrial activity during October-December 2024, the sectors outlook remains positive. The confidence of survey participants was associated with expectations of easing price pressures as well as accommodative economic and taxation policies.”

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
Country posted monthly Current Account surplus of USD 349mn (surplus for 3rd consecutive month) in Oct’24

The country posted a Current Account surplus of USD 349mn for the month of Oct’24 compared to a surplus of USD 86mn during Sep’24.

During 4MFY25, the country’s posted current account surplus of 218mn as compared to a deficit of USD 1,528mn during the same period last year.

https://x.com/ArifHabibLtd/status/1858389558800392463

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Pakistan posts highest-ever $1.2b current account surplus in March
On a year-on-year basis, the surplus surged 230% from $363 million recorded in March 2024.


https://tribune.com.pk/story/2540553/pakistan-posts-highest-ever-12...

Pakistan’s current account posted a record surplus of $1.2 billion in March 2025, reversing a revised deficit of $97 million from the previous month, data released by the State Bank of Pakistan (SBP) showed on Thursday.

On a year-on-year basis, the surplus surged 230% from $363 million recorded in March 2024.

According to brokerage firms Topline Securities and Arif Habib Limited, March 2025 marked the "highest-ever monthly current account surplus" in the country’s history.

The robust performance brought the cumulative current account surplus to $1.86 billion during the first nine months of FY2024–25, a sharp turnaround from a $1.65 billion deficit in the same period of the previous fiscal year.

“With oil prices down and remittances hitting record levels, Pakistan’s current account is expected to remain in surplus through June FY25, and possibly into FY26, supporting overall investor confidence,” said Khurram Schehzad, Advisor to the Finance Minister.

Exports of goods and services in March stood at $3.51 billion, up 8.7% from $3.23 billion in the same month last year. Imports rose 8% year-on-year to $5.92 billion.

Workers' remittances surged to $4.05 billion in March, marking a more than 71% increase from the previous year, a key factor in the current account turnaround.

Analysts say low economic growth, persistently high inflation, tight monetary policy, and import restrictions have all contributed to narrowing the current account deficit, alongside improving exports.

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
Textile exports increased by 10% YoY to USD 1.4bn in Mar'25

Textile exports increased by 10% YoY | 1% MoM to USD 1.4bn in Mar'25. For 9MFY25, exports rose by 9.4% compared to the previous year, reaching USD 13.6bn.

https://x.com/ArifHabibLtd/status/1912831835828109746