Manufacturing woes

Latest figures show that output has been declining for 10 consecutive months

Large-scale manufacturing continues contracting, with the government’s latest data showing a year-on-year decline of over 10%. Although the rate of decline has shown a decreasing trend, the latest figures also show that output had been declining for 10 consecutive months, so it is not just a decline in output, but a sustained decline, which takes longer to address, let alone turn around. Barring external events, it will take several more months to get back to growth in the sector. Although we are well away from the March peak of a 25% decline, June — the latest month of data — saw industrial output contract by 15%, with key sectors such as textiles shrinking by almost 19%. Yarn, which shrank by over 22%, saw the biggest decline among textile products.

While the reduction in output has already caused job losses, the true impact has not even started yet — many industrial units are relying on a combination of cash reserves and hope to keep from shutting down. However, both of these are finite resources. The real impact of job losses will be when the manufacturers are forced to shift from production cuts and layoffs to permanently shutting down.

And while petroleum products did decline by over 13%, their demand and output are based on external factors, such as international prices, meaning no government can take much credit — or blame — for its performance. On the other hand, the auto sector is near collapse, having declined by almost 50% as loss of demand, limited availability of lines of credit and import restrictions all converged to steamroll the sector. Indeed, many experts fear what will happen if one of the big automakers decides to make their temporary plant closures permanent, since several related industries would also suffer.

Under normal circumstances, the caretaker government would only need to keep the ship afloat to be given a passing grade. But in these testing times, and with its tenure still undefined, we must hope that Dr Shamshad Akhtar and the rest of the interim economic team can turn the situation around sooner rather than later.

Published in The Express Tribune, August 19^th, 2023.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.