ISLAMABAD: Large-scale manufacturing (LSM) shrank 7.90 per cent in January over the same month last year, according to data released by the Pakistan Bureau of Statistics on Tuesday.

The big industry production contracted for the fifth consecutive month of the current fiscal year sending fears of major layoffs, especially in the textile sector.

The contraction in the industrial output indicates that economic growth will slip further in the third quarter. It is estimated that the fourth quarter will be more disturbing owing to the discontinuation of subsidised energy to industries along with the highest-ever cost of industrial inputs.

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

Between July and January, LSM also posted a negative growth of 4.40pc on a year-on-year basis.

Costly inputs and import curbs blamed for slowdown

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 a marginal rise.

In January, the textile sector production shrank 14.20pc over a year ago. Major negative growth originated from yarn (30pc), and cloth (17.66pc). Nominal growth was reported in the production of other products.

In contrast, the production of garments jumped 32.26pc during January, driven by higher demand.

In the food group, wheat and rice production dipped by 8.14pc and tea blended by 9.47pc. However, the production of cooking oil was up by 11.22pc and vegetable ghee by 11.75pc, respectively.

Petroleum products posted a negative growth of 1.81pc in January FY23, mainly because of a decline in the production of petrol and high-speed diesel while almost all other petroleum products recorded a slowdown except jet fuel and furnace oil.

The auto sector also saw a 60.45pc slump in January FY23 as the production of almost all kinds of vehicles went down, except for diesel engines.

The production of iron and steel dipped 8.76pc during January mainly because of a decline of 23.64pc in billets/ingots, whereas that of non-metallic mineral products dipped 0.18pc. However, chemical products posted a negative growth of 7.74pc in January from a year ago. The production of pharmaceutical products dipped 23.85pc, while that of rubber products declined 8.06pc in January from a year ago.

Published in Dawn, March 15th, 2023