LSM output narrows 2.6% in Aug

October 17, 2024 (MLN): The large-scale manufacturing (LSM) sector of Pakistan recorded a decline of 2.65% in August 2024 compared to last year, the Pakistan Bureau of Statistics (PBS) reported Thursday.

On a monthly basis, it increased 4.68% compared to July's 106.35 points.

Cumulatively in the two months of fiscal year 2024-25, the LSM showed a contraction of 0.19% year-on-year.

The main contributors towards overall contraction of 0.19% in 2MFY25 are, Food (0.32), Tobacco (0.39), Textile (0.63) Garments (2.15), Petroleum Products (0.51), Automobiles (0.39), Pharmaceuticals (-0.10), Cement (-1.02), Iron & Steel Products (-0.71), Electrical Equipment (-0.63) and Furniture (-1.85).

Industry accounts for about 18% of Pakistan's total GDP at producer prices. Data on industrial production in Pakistan is not available on a high-frequency basis, as GDP figures are officially released quarterly with at least a two-month lag.

As a proxy for industrial production, policymakers in Pakistan rely on Large Scale Manufacturing (LSM), which is a sub-component of total industrial production. The performance of LSM 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% of manufacturing — a sub-component of Industry — and about 8% 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.

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