By Farooq Awan

Pakistan’s economy showed signs of stabilization during the first eight months of the current fiscal year as inflation moderated and industrial activity recovered, according to the latest Monthly Development Update released by the Ministry of Planning, Development and Special Initiatives.

The report states that average inflation during July–February FY2025-26 eased to 5.5 percent, compared with 5.9 percent recorded during the same period last year. The moderation reflects the impact of policy, relief and administrative measures introduced by the government to contain price pressures and support macroeconomic stability.

However, inflation increased temporarily in February 2026, when consumer price inflation reached 7.0 percent, compared with 1.5 percent in the same month last year. The report attributes the rise mainly to a low base effect and adjustments in electricity prices.

Industrial activity also showed improvement during the period. Large-scale manufacturing (LSM) recorded cumulative growth of 4.8 percent during July–December FY2026, reversing a 1.8 percent contraction observed in the same period last year.

The report notes that 14 out of 22 sectors included in the LSM index recorded positive growth, indicating a broad-based recovery in industrial production.

Several manufacturing sectors contributed to the expansion. Food production grew by 10.6 percent, tobacco by 8.7 percent, wearing apparel by 7.5 percent, and textiles by 1.5 percent.

Some sectors recorded particularly sharp increases. Non-metallic mineral products expanded by 510.5 percent, while the automobile sector grew by 967.2 percent during the period under review.

The improvement in manufacturing activity was also reflected in construction-related industries. Cement dispatches increased by 10.9 percent to 34.8 million tonnes during July–February FY2026, indicating strengthening domestic demand and growing momentum in construction activity.

Overall, the report notes that Pakistan’s macroeconomic environment during the first eight months of FY2025-26 reflects improved stability, supported by easing inflation and a recovery in industrial performance.

Credit: INP-WealthPk