LSM production shrinks 3.7pc

Published February 17, 2023
MULTAN: A labourer works on a mechanised loom at a workshop on Thursday. Record energy and raw material prices amid import curbs have slowed down economic activity across all key sectors, raising fears of mass layoffs.—AFP
MULTAN: A labourer works on a mechanised loom at a workshop on Thursday. Record energy and raw material prices amid import curbs have slowed down economic activity across all key sectors, raising fears of mass layoffs.—AFP

ISLAMABAD: Large-scale manufacturing (LSM) shrank 3.68 per cent in the first half of the current fiscal year from a year ago, according to data released by the Pakistan Bureau of Statistics on Thursday.

The big industry production contracted for the fourth consecutive month of the ongoing fiscal year, mainly because of the shortage of raw materials due to import restrictions, sending fears of mass layoffs.

In December, the LSM growth declined 3.51pc on a year-on-year basis as against 5.49pc dip in November 2022.

The contraction in the industrial output indicates that economic growth will slip further. It is estimated that the second half of FY23 will be more disturbing owing to the suspension of gas supplies to industrial units in winter besides a production slowdown, especially in the textile sector.

There was a negative growth of 7.7pc in October 2022 and 2.27pc in September 2022 on a year-on-year basis. While a paltry rise of 0.30pc was recorded in August after LSM shrank 1.67pc in July.

In the previous fiscal year, large-scale manufacturing grew 11.7pc year-on-year. The production estimate for LSM industries was made using the new base year of 2015-16.

Economists have been raising concerns about a slowdown caused by record energy and raw material

prices along with restrictions on imports. The export-based manufacturers have already hinted at a decline in their production due to higher costs of energy and other inputs mainly because of the discontinuation of subsidised electricity.

The production of 19 sectors shrank and only one posted marginal rise.

During 2021-22, the LSM sector, which accounts for 9.2pc of GDP, dominated the overall manufacturing sector with 74.3pc of the sectoral share, followed by a 15.9pc share of small-scale manufacturing, or 2pc of GDP.

In 1HFY23, the textile sector production shrank 13.06pc over a year ago. Major negative growth originated from yarn (14.20pc), cloth (7.20pc), knitting wool (100pc) and woollen blankets (54.91pc). Nominal growth was reported in the production of other products.

In contrast, the production of garments jumped 46.61pc during the 1HFY23, driven by higher demand.

In the food group, wheat and rice production dipped by 12.29pc and tea blended by 13.42pc. However, the production of cooking oil was up by 11.62pc and vegetable ghee by 3.36pc, respectively.

Petroleum products posted a negative growth of 11.15pc in 1HFY23, mainly because of a decline in the production of petrol and high-speed diesel while almost all other petroleum products recorded a slowdown.

The auto sector also saw a 30.23pc slump in 1HFY23 as the production of almost all kinds of vehicles went down, except for buses, jeeps and diesel engines.

The production of iron and steel dipped 2.13pc during 1HFY23 mainly because of a decline of 11.10pc in billets/ingots, whereas that of non-metallic mineral products dipped 11.72pc. However, chemical products posted a marginal growth of 0.10pc in 1HFY23 from a year ago. The production of pharmaceutical products dipped 21.56pc, while that of rubber products declined 7.62pc in 1HFY23 from a year ago.

Published in Dawn, February 17th, 2023

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