“…inflation expectations increased slightly for consumers but declined for businesses in the latest sentiment surveys…“ reads an excerpt from the central bank’s July 30, 2025, Monetary Policy Statement. “Supported by easing financial conditions, positive business sentiments and a gradually strengthening macroeconomic environment, real GDP growth is projected to rise to 3.25 – 4.25 percent this year….”, reads another.
It would have been good — if it were true. SBP’s own Business Confidence Survey shows inflation expectations among businesses hitting two of their highest readings in recent years in the last two survey rounds. Yet this is precisely where the central bank saw a “decline” worth highlighting. And it’s not as if the SBP was teeing up a rate cut to make the framing at least politically convenient — it wasn’t.
July 2025 Business Confidence Index (BCI) slipped to its lowest since December 2024. Calling business sentiment “positive” is technically accurate — in a diffusion index, anything above 50 counts — but the trend is hardly reassuring. The BCI has fallen for two consecutive months, only the third such losing streak in the past 30 months, and the direction of travel is unmistakably downward.
The Purchasing Managers’ Index (PMI), a key sub-component of the BCI — saw its steepest-ever month-on-month drop, plunging 4.8 percentage points. At a six-month low in July 2025, the PMI reflects weakening across the board: past six months’ production, headcount, order books, and raw material purchases all lost ground.
Industry capacity utilization has barely budged over the past year, which is still more than 600 basis points below where it stood at the start of 2024. The lackluster LSM growth numbers tell the same story, matching the subdued tone of business sentiment.
Looking ahead, there isn’t much for businesses to cheer. Expected demand for credit over the next six months is at a six-month low, while hiring plans aren’t exactly inspiring. In manufacturing, sentiment on the rupee-dollar parity has slumped to its weakest since September 2023.
Yes, the macro indicators have improved, and some high-frequency data suggest a modest recovery. But that has yet to translate into a sustained lift in business sentiment — something official communication would do well to acknowledge.