LSM Recovers in November

Large-scale manufacturing (LSM) in Pakistan experienced a partial recovery in November after a contraction in the preceding month, according to data released by the Pakistan Bureau of Statistics. The LSM posted a growth of 1.59% on a year-on-year basis, with the main contributors being food, beverages, textiles, leather products, petroleum products, and chemicals. The LSM turned positive in August 2023 after 14 months of contraction and extended the growth in September as well.

The removal of import restrictions, clearance of outstanding letters of credit, and improved dollar liquidity following the improvement in the SBP forex reserves are considered to have helped in a pick-up in economic activity. In November, 12 out of 22 sectors picked up positive growth, including food (1.80%), beverages (19.09%), wearing apparel (27.79%), leather products (3.55%), wood products (31.82%), petroleum products (2.77%), fertilizer (21.37%), pharmaceuticals (23.62%), machinery and equipment (99.46%), and textile (0.41%).

The LSM shrank 0.80% in the first five months of 2023-24. In the textile and clothing sector, negative growth was observed in yarn (2.80%) and cloth (3.89%), but a massive growth of 27.79% was recorded in the garment sector in November from a year ago. In the food group, wheat and rice production declined by 2.76%, but the production of cooking oil rose by 25.31% and vegetable ghee by 0.19% during the month. Petroleum products posted a growth of 2.77%, mainly because of an increase in the production of petrol (7.63%), high-speed diesel (5.19%), LPG (4.35%), and kerosene (44%).

However, there was a notable decline in iron and steel production, which experienced a decrease of 0.63%, and electrical equipment by 7.84%. The production of fertilizers experienced a surge of 21.37%, while the production of rubber items witnessed a negative growth of 4.49%. The production of pharmaceutical products experienced a significant surge, with an impressive increase of 23.62%. The auto sector also saw a 66.07% slump in November as the production of almost all kinds of vehicles went down. According to the finance ministry, in July-November FY24, the performance of the auto industry remained subdued due to massive increases in input prices and tightened auto finance. Car production and sales decreased by 58.1% and 53.3%, while truck & bus production and sales decreased by 56.1% and 47.2%. However, the tractor’s production and sale increased by 60.7% and 98.2%.

The sale of petroleum products slumped by 16% to 6.45m tonnes against 7.70m tonnes in the same period last year. In November 2023, oil sales recorded at 1.37 mn tonnes, down 11% YoY. Cement dispatches in November 2023 were 3.924m tonnes (declined by 2.1%), against 4.009m tonnes dispatched during the same month last year. During July-November FY24, total cement sales (domestic and exports) were 19.816m tonnes, 10.8% higher than 17.883m tonnes in the corresponding period last year. Domestic dispatches during this period were 16.688m tonnes against 16.354m tonnes during the same period last year, showing an increase of 2.04%. Export dispatches were also 104.6% higher as the volumes increased to 3.129m tonnes during the first five months of the current fiscal year compared to 1.529m tonnes exported during the same period of the last fiscal year.

The LSM in Pakistan experienced a partial recovery in November after a contraction in the preceding month. The removal of import restrictions, clearance of outstanding letters of credit, and improved dollar liquidity following the improvement in the SBP forex reserves are considered to have helped in a pick-up in economic activity. However, the auto sector and cement industry faced challenges in the same period. The LSM is expected to continue its recovery in the coming months, with the