Manufacturing PMI

Manufacturing activity across the globe presented a mixed but cautiously optimistic picture in the latest round of Purchasing Managers’ Index (PMI) data. Pakistan’s manufacturing sector made a strong comeback in November, returning to growth after three months of contraction, while the United States recorded stable though moderating expansion. Globally, factory activity has edged back into positive territory, supported by improvements in output and easing export declines. Despite these signs of resilience, challenges persist—ranging from inflation and volatile demand to tariff-driven cost pressures.

Pakistan’s Manufacturing Sector Returns to Growth

The HBL Pakistan Manufacturing PMI, compiled by S&P Global, surged to 52.3 in November, up sharply from 49.6 in October. This upward move is particularly significant as it marks the first expansion in three months, signaling renewed momentum in the country’s industrial activity.

The key driver behind this improvement was a rebound in new orders, ending a six-month streak of contraction. Companies reported improved client confidence, better product quality, and stronger domestic demand. Manufacturers noted that customers appeared more willing to place fresh orders after months of caution driven by inflation and economic uncertainty.

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Domestic Demand Fuels the Rebound

While Pakistan’s internal market showed resilience, new export orders fell for the fifth straight month, underlining persistent challenges in foreign markets. Higher taxes, rising inflation, energy shortages, and rising operational costs have limited the ability of manufacturers to compete globally.

Despite these hurdles, domestic demand remained strong enough to drive overall sector expansion. Local buyers, particularly in consumer goods and industrial supplies, contributed significantly to November’s gains.

Production and Employment Strengthen

With demand improving, production volumes rose at the fastest pace since early 2025. The increase in output encouraged manufacturers to boost hiring, resulting in the first rise in employment levels in six months. This improvement is particularly notable in a year when firms have been cautious about workforce expansion due to cost pressures and uncertain demand.

Moreover, purchasing activity increased for the first time in seven months. Businesses sought to replenish inventories and hedge against potential price hikes in raw materials—a sign of growing confidence in the near-term economic outlook.

Rising Input Costs Remain a Concern

Despite the optimistic headline figures, inflationary pressures continue to loom over Pakistan’s manufacturing economy. Input costs rose at the fastest pace since February, driven by higher raw material prices, increased fuel charges, and heavier taxation. Interestingly, while costs rose sharply, selling prices increased more slowly, as firms absorbed part of the price burden to avoid losing customers.

Outlook and Policy Expectations

Humaira Qamar, Head of Equities & Research, noted that although manufacturers remain optimistic about the year ahead—supported by expansion plans and new product launches—there are significant risks. These include elevated inflation expectations, a widening trade deficit, and continued weakness in exports.

Given these factors, analysts widely expect the central bank to maintain its current monetary stance in the December policy meeting, keeping interest rates steady.

US Manufacturing PMI: Solid but Moderating Growth

The S&P Global US Manufacturing PMI registered 52.2 in November 2025, slightly above the preliminary estimate but lower than October’s reading of 52.5. Despite the slight dip, the sector continues to expand and has now grown in ten of the past eleven months.

Output Gains Offset by Demand Uncertainty

Production increased at its fastest pace since August, supported by an uptick in new orders. However, overall demand remained modest, with businesses citing persistent market uncertainty, slower-than-expected sales, and cautious customer spending.

Inventory Build-up Signals Mixed Conditions

One of the most notable features of the November report was the record rise in finished goods inventories for the second month in a row. This suggests that output may have exceeded demand—potentially leading to a production slowdown if sales do not pick up in the coming months.

At the same time, employment growth reached a three-month high, indicating that firms remain optimistic about long-term business conditions.

Tariffs Keep Cost Pressures Elevated

Input cost inflation remained high due to ongoing tariff pressures. While selling prices continued to rise, the pace of inflation eased to one of the lowest levels recorded in 2025. Even so, cost burdens remain a key concern for US manufacturers navigating global supply chain adjustments.

Business Confidence Improves

Despite demand uncertainties, business sentiment in the US strengthened noticeably, reaching its highest level since June. Manufacturers expressed optimism about the economic outlook, anticipating that easing tariffs and improved supply chain conditions will support growth in 2026.

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Global Manufacturing: Back in Expansion But Risks Remain

Globally, manufacturing activity showed signs of recovery. The Global Manufacturing PMI, sponsored by J.P. Morgan and compiled by S&P Global, increased from 49.5 in May to 50.3 in June, moving above the neutral 50 mark for the first time in three months.

Output Rebounds; Export Declines Ease

Factory output improved modestly, marking the strongest performance since February. Export orders continued to fall but at the weakest pace in three months, indicating that global trade flows may stabilize in the coming quarters.

However, the global inventory build-up—particularly in the US, driven by tariff-related stockpiling—could pose downward risks to production if demand slows.

Diverging Price Trends

Inflation pressures varied significantly across regions. US manufacturers faced steeper cost increases due to tariffs, while European and Asian producers reported moderate cost growth. These disparities could lead to diverging monetary policy trends in major economies.

Conclusion

Overall, global manufacturing shows a cautiously optimistic path. Pakistan stands out with a strong rebound supported by domestic demand and rising production. The US economy remains in expansion territory with solid output but lingering uncertainties. On the global stage, manufacturing has climbed back into growth, though risks tied to tariffs, inflation, and uneven demand remain a challenge moving forward.