The HBL Pakistan Manufacturing Purchasing Managers' Index (PMI) climbed to 51.7 in July 2026, up from 50.8 in June, marking the strongest improvement in manufacturing conditions in four months and signalling continued expansion in Pakistan's industrial sector.

The latest survey showed that the recovery was primarily driven by stronger domestic demand, while export orders remained resilient despite ongoing geopolitical uncertainty. Although manufacturing activity improved during the month, the pace of growth remained moderate as businesses continued to navigate risks arising from tensions in the Middle East.

After contracting in June, new orders returned to growth in July, supported by improved customer confidence and competitive pricing. The rebound also resulted in the fastest expansion in manufacturing output in five months, prompting manufacturers to increase purchasing activity and expand employment for the first time since March 2026.

While export demand continued to support overall business activity, the survey indicated that domestic demand became the primary engine of growth during the month. At the same time, inflationary pressures eased, with both input cost inflation and output price inflation moderating despite continued increases in raw material and fuel costs.

The report also pointed to a gradually improving business environment, supported by softer cost pressures and stable monetary conditions following the State Bank of Pakistan's decision to keep the policy rate unchanged at 11.5%.

Looking ahead, the survey suggests that Pakistan's manufacturing sector is positioned for gradual recovery, although sustained growth will depend on continued policy stability, resilient domestic demand, stronger export performance and a supportive external environment amid ongoing geopolitical challenges.