HBL Manufacturing PMI slows in early signs of US-Iran War

April 1, 2026 (MLN): The HBL Pakistan Manufacturing PMI fell to 52.9 in March from 53.6 in February, pointing to easing manufacturing conditions in nascent signs of the US-Iran war’s toll on Pakistan’s economy.

The slowdown reflected a softer rise in output and new orders, with respondents noting that intensifying inflationary pressures offset the benefits of strengthening demand.

The output index was well below the previous six-month average, as firms cited inflation as a limiting factor.

On the other hand, new order growth edged down only slightly, held up by improved product quality and external demand, with export orders climbing to a 12-month high.

Despite the softer momentum in output, firms continue to build safety stocks, lifting post-production inventories at the most pronounced rate since May 2024.

Employment growth weakened as slower output and order growth weighed down hiring.

Price pressures remain a key theme as the impact of the US-Iran conflict unfolds. Input costs climbed sharply, amid higher raw material and fuel prices alongside increased tax burdens.

Manufacturers passed through the recent cost burdens more aggressively, pushing selling price inflation to the fastest rate since August 2024.

Kumail Chevelwalla, Team lead Equities & Research – HBL, commented on the latest reading saying, "Business confidence in output expansion is down to a record low, reflecting concerns about the sustainability of demand conditions amid persistent inflationary pressures."

Given evidence of higher energy costs spilling over into broad-based inflation, and signs of inflation expectations becoming unanchored, we believe that risks are skewed towards a rate hike moving forward.

The trajectory of interest rates will ultimately be a function of the duration and intensity of the conflict. 

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