ISLAMABAD: The Large-Scale Manufacturing (LSM) sector contracted 0.03 per cent in 2023-24 against a 0.92pc growth in the preceding year, showed data released by the Pakistan Bureau of Statistics on Friday.

The LSM had grown positively since December 2023 to May this year before entering negative territory in June. The contraction in FY24 was due to domestic and global challenges.

Textile, non-metallic mineral products, iron and steel products, automobiles, and tobacco were the primary contributors to the LSM downturn in FY24. However, some export-oriented industries, such as textiles, furniture, leather, and football, witnessed higher output during the same period.

LSM in June shrank 0.03pc compared to a massive contraction of 17.66pc in June 2023.

The food group expanded by 1.73pc in FY24, compared to a contraction of 7.05pc in FY23. Cooking oil, tea blended, starch-related items and sugar baking products and chocolates all experienced a rise of 13.20pc, 8.82pc, 0.65pc and 1.3pc, respectively.

Key sectors remain plagued by high input costs, low demand

Wheat and rice milling production declined by 0.82pc while vegetable ghee production fell by 4.14pc. Wheat and rice milling fell substantially less during the period under review, owing primarily to improved crop harvests. Furthermore, despite decreased output and delays in beginning sugarcane crushing, sugar production rose marginally during this period.

The textile sector fell 5.23pc in FY24, compared to an 18.70pc contraction the previous year. Cotton yarn has declined by 8.07pc, while cotton cloth has decreased by 5.34pc, accounting for more than 80pc of the textile sector. The primary cause of reduced production was a drop in export unit value in the face of weak external demand for textiles and increased competition from China.

Furthermore, higher power prices following the elimination of energy subsidies for export-oriented sectors, the high cost of imported raw materials, the phase out of the Export Finance Scheme, and high loan rates were all key factors influencing textile output.

Coke and Petroleum products recorded a growth of 9.81pc in FY24 against a contraction of 13.39pc in the same period last year. Diesel oil increased 14.71pc, petrol 7.99pc, furnace oil 20.19pc and LPG 4.19pc. However, jet fuel declined 7.9pc and kerosene declined 10.96pc.

Growth of the automobile sector plunged by 25.03pc in FY24 against a contraction of 50.01pc in FY23. Import restrictions on completely knocked down (CKD) and semi knocked down (SKD) automobile kits have further reduced automobile production during the period under review.

The automotive industry grapples with many challenges, including a decline in demand, exacerbated by factors such as rising car prices due to inflation and currency fluctuations. Moreover, non-enticing auto financing options offered by banks further dampen consumer interest.

Iron and steel production declined 4.42pc in FY24 compared to a 5.12pc fall the previous year. Billets/ingots, mostly consumed in the construction industry, experienced a 7.94pc decline. Similarly, H/C.R. sheets/strips/coils/plates grew adversely by 2.51pc.

Published in Dawn, August 17th, 2024