Pakistan's factory PMI dips in early sign of global tariff headwinds
The latest dip in the index hints at the impact of U.S. President Donald Trump's trade tariffs, said Humaira Qamar, Head of Equities & Research at HBL.
'We believe that the latest PMI dips are early signs of the headwinds to the global economy from the introduction of U.S. tariffs,' said Humaira Qamar - Head Equities & Research at HBL.
New orders slumped while export orders in particular plummeted. Employment fell for a second month as firms cut costs, said Qamar.
Qamar warned that any U.S. stagflation would hurt Pakistan's exports, particularly to the U.S. which accounts for 18% of its total, potentially prolonging the manufacturing downturn, though lower commodity prices could provide some relief, she added.
Despite the slowdown, the PMI remains above 50, indicating expansion amid a favourable inflation outlook.
Qamar said she expects an interest rate cut on Monday due to strong deflationary pressures. But a Reuters poll suggests Pakistan's State Bank will hold rates steady at 12%, following a surprise pause in its last meeting due to geopolitical tensions and inflation concerns.
Pakistan's annual inflation rate fell to 0.3% in April, well below the Ministry of Finance estimate of 1.5% to 2%. The central bank forecasts average inflation to be in the range of 5.5% to 7.5% for the fiscal year ending June.
Pakistan's largest bank, HBL, and global financial information and analytics firm S&P Global launched the index In February to track the country's manufacturing sector.
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