Latest news with #LSM
Business Recorder
3 days ago
- Business
- Business Recorder
LSM: Time machine the wrong way
The latest data from Pakistan's Large-Scale Manufacturing (LSM) sector paints a troubling picture: not of a comeback, but of an industry stuck in a prolonged state of regression. Yes, May 2025 marked a 2.3 percent year-on-year growth — the third positive monthly print this calendar year — but this is no sign of a turnaround. It's more of a dead cat bounce than a structural recovery. Cumulatively, LSM contraction has now entered its ninth straight month, with 10MFY25 output down 1.52 percent. The headline figure for March, previously celebrated as a return to growth at 1.78 percent, has been quietly revised down — and how. The revised March figure now shows a contraction of 2.78 percent, marking the lowest reading since the start of the current LSM base, barring the COVID-induced collapse of FY20. The culprit? A massive downward revision in the food index, led by sugar. March's sugar output was chopped significantly in the revised data, dragging the entire sector down. Seasonal production of sugar now clocks in at 5.78 million tons — nearly a million tons short of last year's haul. And with May historically contributing little to sugar output, the final season numbers are likely to be 8–9 percent below last year. Despite the recent uptick, the broader reality remains grim. The LSM index for April is barely above readings from the past two years, and still a full 10 percentage points below its FY18 level. In fact, output levels are now back to where they were in FY17 — wiping out nearly eight years of supposed industrial progress. On a cumulative basis, output is even lower than FY19 and only marginally ahead of FY21 — and that's saying something. To put it bluntly: Pakistan's industrial time machine isn't broken. It's just been set permanently in reverse. The diffusion index — a measure of how widespread growth is — offers some surface-level hope, with 12 of 22 tracked sectors in the green. But scratch the surface, and the optimism fades. Only a handful of these are growing with any real momentum. The rest are dragging their feet. Pharmaceuticals and textiles are barely growing at under 3 percent. Readymade garments have lost steam since earlier this year. The one relatively bright spot is automobiles, buoyed by a low base and some modest demand recovery. Meanwhile, the industrial backbone continues to deteriorate. Cement, steel, chemicals, and white goods — once the bellwethers of economic progress — are stuck in the red. Food has now officially joined that club, led by the sugar slump. 10 LSM subsectors are still operating below the index level that marked the beginning of this base year. Some may never climb back. That's not cyclical weakness. That's structural decay. To be fair, there are glimmers of hope. The State Bank's Purchasing Managers Index (PMI) for May reached a 12-month high. Capacity utilization across industries is holding steady at 65.7 percent — broadly in line with the last year's average. And while the central bank kept interest rates unchanged in its latest policy meeting, it did signal expectations of recovery led by services and industry in FY26. But the devil is in the details — or in this case, the omissions. The Monetary Policy Committee avoided naming any specific LSM sectors poised for growth. That's because, apart from autos, the cupboard is nearly bare. Growth in private sector credit, sentiment indicators, and import flows were cited instead. Translation: there's hope, but not a whole lot of substance behind it — at least not yet. Lower industrial electricity tariffs and cheaper credit might help slow the bleeding. But resurrecting industrial momentum is a different beast altogether. The highs of FY22 aren't just out of reach — they're not even on the industrial engine isn't revving up. It's idling in neutral — and sometimes slipping into reverse. And unless there's a concerted effort to address the structural issues holding LSM back, no amount of sugar-coating is going to change that.
Business Recorder
3 days ago
- Business
- Business Recorder
Apr LSMI output grows 2.29pc YoY
ISLAMABAD: The large-scale manufacturing Industries (LSMI) of the country has registered an increase of 2.29 percent in April 2025 to 108.37 compared to last year's 105.93, the LSMI data released here on Tuesday by the Pakistan Bureau of Statistics (PBS) revealed. On a monthly basis, the LSMI registered a decline of 3.2 per cent compared to March's 111.95 points. Cumulatively in the 10 months of the ongoing fiscal year 2024-25, the LSM showed a contraction of 1.52 per cent on a year-on-year (YoY) basis. On YoY basis automobile industry posted 42.16 per cent growth, cotton yarn 8.40 per cent, garments 6.01 per cent, petroleum products 5.01 per cent and cotton clothes 0.75 per cent, while sugar industry witnessed a decline of 14.55 per cent, iron and steel 10.11 per cent, cement 5.62 per cent and fertilizer 0.73 per cent. Jul-Mar LSMI output grows 1.47% YoY The main contributors remained tobacco (0.17 per cent), textile (0.49) garments (0.91), petroleum products (0.35), pharmaceuticals (0.16), automobiles (0.73), other transport equipment (0.15), food (-0. 50), chemicals (-0.42) non-metallic mineral products (- 0.61), cement (-0.32), iron and steel products (-0.47), electrical equipment (-0.42), machinery and equipment (-0.18) and furniture (-1.82). The production in July-April 2024-25 as compared to July-April 2023-24 has increased in tobacco, textile, wearing apparel, coke and petroleum products, automobiles and other transport equipment while it decreased in food, chemical products, non-metallic mineral products, iron and steel products, electrical equipment, machinery and equipment, and furniture. The performance of LSMI is a key indicator of the overall health of the industrial sector and is assessed monthly through the Quantum Index of Large Scale Manufacturing Industries (QIM). Historically, LSM dominates the manufacturing sector of GDP, accounting for around 69 per cent of manufacturing, a sub-component of Industry, and about eight per cent of the overall GDP. Economic activity began to rebound in the second half of FY24. However, global demand slump, currency devaluation, and a widening current account deficit severely limited the government's flexibility, particularly in maintaining fiscal discipline amidst stringent financial conditions. Following products registered an increase beverages 0.15 per cent, tobacco 0.17 per cent, textile 0.49 per cent per cent, wearing apparel 0.91 per cent, leather products 0.01 per cent, wood products posted zero per cent growth, paper and board products 0.03 per cent, coke and petroleum products posted a growth of 0.35 per cent, pharmaceuticals 016 per cent, computer, electronics and optical products posted zero per cent growth, automobiles 0.73 per cent and other transport equipment 0.15 growth. Following sectors registered a decline food 0.50 per cent, chemicals 0.42 per cent, chemical products 0.38 per cent, fertilisers 0.04 per cent, rubber products zero per cent, non-metallic mineral products 0.61 per cent, iron and steel products 0.47 per cent, fabricated metal 0.06 per cent, electrical equipment 0.42 per cent, machinery and equipment 0.18 per cent, furniture 1.82 per cent, and other manufacturing 0.08 per cent. Copyright Business Recorder, 2025
Business Recorder
11-06-2025
- Business
- Business Recorder
FPCCI offers mixed reaction to budget
ISLAMABAD/ KARACHI: The business community of the country has expressed mixed reaction on the presentation of federal budget 2025-26, saying the government has totally ignored women entrepreneurs. Speaking at a press conference simultaneously from Islamabad, Karachi and Lahore, the leaders of Federation of Pakistan Chamber of Commerce and Industry (FPCCI) led by Atif Ikram Sheikh, president FPPCI, overall appreciated the budget proposals, adding that the business community will give detailed reaction within the next few days after detailed study and review of the budget. The FPPCI representatives said the government in some sectors has provided relief and some sectors have all together been ignored. Education sector is also ignored; exporters should also be facilitated as an estimated Rs2,500 billion deficit is on the cards and enhancing exports is one of the key factors to bridge the budget deficit. They said that the government has also ignored infrastructure of Information Technology (IT) sector. They; however, appreciated the government for taxing e-commerce, saying this is a good tax which will help promote local online business platforms. FPCCI President Sheikh, while welcoming the budgetary proposals, said that the government has accepted most of the demands and proposals regarding relief in taxation, measures to reduce power prices, and taking steps for ease of doing business. He; however, said that since the inflation has reached the lowest level; therefore, the government should have announced reducing the rate of interest from the present 12 percent level to 6-7 percent, which is critical to boost commercial activities. A reduction in super tax from one per cent to 0.5 per cent is also appreciable, as well as, a reduction in stamp duty on property from four per cent to 2.5 per cent. Sheikh said that earmarking a hefty Rs716 billion budget for the Benazir Income Support Programme (BISP) to help around 10 million households of marginalised segment will help reduce the poverty level. He said that the FPPCI in the next few days will give a detailed reaction after detailed consultation with all the sectors. The FPPCI president said that the government needs to pay serious attention towards Large Scale Manufacturing (LSM) which has shown negative growth during out going financial year, saying that the growth of LSM will increase employment. He said that overall business community was satisfied with the performance of national economy with 2.7 percent GDP growth and setting 4.2 percent GDP growth target was also not overestimated. Pakistan has made a good economic recovery, the government needs to take this recovery towards stability, he added. This year, the size of the economy has exceeded $400 billion for the first time, which is a great achievement, said Sheikh. However, he was of the view that in addition to these achievements, more work is needed on many sectors of the economy. The major decline in large-scale manufacturing in the current fiscal year is worrying, he expressed. Patron-in-Chief United Business Group (UBG) SM Tanveer also hailed the overall budgetary proposals from providing relief to construction industry to GDP growth but flayed the government for imposing 18 percent tax on solar panels. He said that the imposition of 18 percent tax on solar panels will increase the cost of solar electricity which at present was the only cheap source of energy for all the segments of the economy from household to industry. Tanveer also appreciated the government for creation of the National Seed Development and Regulatory Authority (NSDRA), saying in other countries there are a maximum five to six dozens seed supplying and developing companies but in Pakistan at least 1,200 fake seed companies are operating. The government must take stern action against such fake companies which will help increase agriculture productivity. He also hailed the government for reducing taxes on the salaried class and asked the government to immediate reduce interest rate from 12 percent to 6-7 percent. The UBG leader stressed the need for a five-year industrial policy and reduction in electricity prices, saying a long-term industrial policy is the only way to put the country on the path of economic development. Copyright Business Recorder, 2025
Business Recorder
10-06-2025
- Business
- Business Recorder
July-March 2025: LSM experiences 1.5% negative growth
ISLAMABAD: Large-Scale Manufacturing (LSM) has experienced a negative growth of 1.5 percent during July-March 2025 in contrast to a slight decline of 0.22 percent observed in the corresponding period of the previous year. Within manufacturing, LSM plays a dominant role, accounting for 67.5 percent of the manufacturing sector and 8.0 percent of GDP, followed by Small-Scale Manufacturing (SSM) and Slaughtering, which contribute 2.4 percent and 1.4 percent to GDP, respectively, according to Pakistan Economic Survey 2024-25. The quarterly pattern highlights continued challenges in LSM, which has consistently weighed down industrial performance in the outgoing fiscal year. Gradual recovery likely in LSM sector, says FD Overall manufacturing growth slowed to 1.3 percent in FY 2025, compared to 3.0 percent last year. This deceleration was primarily driven by a contraction of 1.5 percent in LSM, compared to a modest growth of 0.9 percent in the previous year. In contrast, SSM and Slaughtering grew by 8.8 percent and 6.3 percent, respectively, providing some support to the sector. This marks the third consecutive year of negative growth in LSM, which can be attributed to ongoing structural challenges, elevated input costs, and downturns in critical sectors such as Food, Chemicals, Iron & Steel, and Electrical Equipment. Despite the overall lacklustre performance, nearly half of the LSM sectors demonstrated positive growth, including significant industries such as Wearing Apparel, Textiles, Coke & Petroleum Products, Pharmaceuticals, and Automobiles, according to the survey. However, in March 2025, the growth of LSM registered a Year-on-Year (YoY) increase of 1.8 percent, in contrast to a growth rate of 1.7 percent during the same month in the previous year. On a Month-on-Month (MoM) basis, LSM experienced a decline of 4.6 percent in March2025, following a drop of 5.6 percent in February 2025. The LSM, based on the Quantum Index of Manufacturing (QIM), declined by 1.53 percent during current fiscal 2025, compared to a growth of 0.94 percent last year. The slowdown reflects mixed performance across key industries - declines were observed in chemicals (-5.51%), iron and steel (-10.94%), electrical equipment (-15.89%), and fabricated metal products (-17.16%), while strong growth was recorded in automobiles (40.0%), wearing apparel (7.62%), textiles (2.15%), and petroleum products (4.48%) High input costs, and elevated tax rates, continued to pose headwinds to LSM growth. Copyright Business Recorder, 2025
Business Recorder
10-06-2025
- Business
- Business Recorder
Economic Survey: an objective survey?
EDITORIAL: Federal Finance Minister Muhammad Aurangzeb began traditional press conference on the Economic Survey 2024-25 claiming that that the Pakistan economy must be viewed in the context of the global economy. It would, however, been more appropriate to compare Pakistan's growth rate with regional countries — China's growth rate for 2024 was 5 percent, India's 6.5 percent for 2025, Bangladesh's 4.2 percent, and Sri Lanka's 5 percent against Pakistan's projected 2024-25 growth of 2.68 percent. This rate even though downgraded from the budgeted 3.5 percent will be a challenge, given that the first quarter GDP rate was revised by the Pakistan Bureau of Statistics (PBS) to 1.34, the second quarter revised to 1.53 percent and third quarter (not yet revised) to 2.4 percent. The Survey notes manufacturing growth at 4.77 percent in spite of slow recovery of the large-scale manufacturing (LSM) sector; however, this rate is not in synch with the LSM negative growth of 1.47 percent July-March 2025 against negative 0.22 percent in the comparable period last year. The Survey determined to give this a positive spin noted that 'despite the overall lacklustre performance it is noteworthy that nearly half of the LSM sectors demonstrated positive growth, including industries such as wearing apparel, textiles, coke and petroleum products, pharmaceutical and automobiles.' One can only hope that this is not a prelude to changing the weightage of the industrial subsectors to show improved performance as was witnessed when Dr Hafeez Sheikh as the Finance Minister reduced the weightage of food in inflation calculation thereby, halving the rate of inflation overnight. Inflation, Aurangzeb contended rightly, has come down dramatically. We are sure that he is aware that basic economic theory dictates a 2 percent inflation is necessary to oil the wheels of industry (supported by the US Federal Reserve). A major contributing factor to the drop in food inflation was the decline in the prices of the staple wheat due to the International Monetary Fund (IMF) barring provincial/federal governments from procuring or setting a support price for wheat, which is likely to lead farmers to switch to a more lucrative crop next year, necessitating imports. The Survey inexplicably does not cite employment/unemployment rates and those that it cites are dated to 2020-21 while the section on Population, Labour Force and Employment details policy priorities including Gender Path and Sustainability, Prime Minister's Women Empowerment package 2024, Initiatives for skill development and employment generation, new initiatives sourced to the Prime Minister, Prime Minister's Youth programme as well as future of employment in green and digital transitions. There is, however, a section on overseas employment but here too the total number is calculated from 1972 onwards, thereby data of overseas employees in 2024-25 is not quantified. The Survey disturbingly notes a net outflow of 1.6 billion dollars on the financial front as government debt repayments escalated and net (as opposed to gross) liabilities decreased. In other words, the financial account remains a source of serious concern, necessitating higher loans and rollovers in the next fiscal year. Total expenditure rose to 16.337 trillion rupees July-March 2025 compared to 13.682 trillion rupees in the comparable period of last year – a rise of 19.4 percent with current expenditure rising by 18.3 percent as per the Survey and this in spite of the massive decline in debt service payments, which rose by 16.7 percent this year compared to a rise of 54 percent recorded last year due to a decline in the discount rate — from 22 percent last year to 11 percent last month. The government had budgeted a 21 percent rise in current expenditure in 2025 and after the recent Indian adventurism effectively repelled by Pakistan it is likely that the rise maybe higher than the budgeted 21 percent. The Survey's claim that the rise in expenditure is attributable to a 'notable rise' in development expenditure is not borne out by data uploaded on the Ministry of Planning, Development and Special Initiatives website which distinguishes authorisations (894 billion rupees July-April 2025) from actual disbursements (expenditure as per SAP), which is less than half at 449 billion rupees. It is important to note that the focus remained on physical infrastructure development rather than on social development particularly education, which was one of the main contributors to China's meteoric rise as an economic power that has enabled the country not to succumb to US tariff threats. Pakistan faces many challenges associated with climate change; however, Shehbaz Sharif-led government has shown a key commitment to overcoming these challenges, reflected by IMF's approval of the 1.4 billion-dollar Resilience and Sustainable Facility. The voluminous Economic Survey publication prepared by the Economic Adviser's Wing under the administrative control of the Finance Ministry released to the general public on a national holiday and as usual a mere one day prior to the Budget presages few, if any, indications of what the Budget would contain the following day. While the statistics it contains are not up to date (with few exceptions including trade figures updated till April and foreign exchange reserves till 27 May) the analysis as always mirrors the government's claims of success in raising the tax-to-GDP ratio (though the budgeted shortfall till end May was cited at one trillion rupees) and the continuation of reliance on indirect taxes whose incidence on the poor is greater than on the rich. Copyright Business Recorder, 2025
