LSMI output drops 3.8% YoY
The Large-Scale Manufacturing Industries (LSMI) output fell by 3.8% year-on-year (YoY) in November 2024, highlighting persistent challenges in key sectors, including high energy costs and weak consumer demand. On a month-on-month (MoM) basis, output also declined by 1.2%, indicating sluggish industrial activity amid economic headwinds.
The LSMI decline was driven primarily by significant contractions in key sectors such as furniture (-53.3%), coke and petroleum (-16.2%), and other manufacturing (-13.3%), according to data from the Pakistan Bureau of Statistics (PBS).
Over the first five months of FY25, LSMI recorded a cumulative decline of 1.3% YoY, with 11 out of 22 sectors showing negative growth, including machinery, non-metallic minerals, and chemicals. However, some sectors posted significant growth, including automobiles (+89%), other transport equipment (+42.8%), and tobacco (+22.6%), supported by recovering demand and stable production costs.
"The numbers are down due to the seasonal impact," said Maaz Azam, Head of Research at Optimus Capital Management.
JS Global reported that LSMI posted negative YoY growth in four of the past six months. Output in November 2024 also declined 1.2% MoM. Following a prolonged contraction from February 2023 to July 2023, largely driven by high energy costs and weak demand, the large-scale sector began stabilising and recovering from August 2023.
"Recent months have seen a dip in LSMI growth, indicating that challenges persist," JS Global added.
Although easing measures have supported recovery, growth is expected to remain moderate in the near term. For 5MFY25, output showed a 1.2% YoY decline, reflecting ongoing pressures.
Taurus Securities highlighted that November's 1.19% MoM decline in LSMI was led by contractions in furniture (-53%), coke and petroleum (-16%), and other manufacturing (-13%). Conversely, top-performing sectors included automobiles (+89%), other transport equipment (+43%), tobacco (+23%), and beverages (+11%). Cumulatively, 5MFY25 LSMI declined 1.25% YoY.
Sectoral insights: textile sector
Textile production increased modestly by 1% YoY in November 2024, driven by higher output in yarn (+8.75%), cloth (+0.78%), and terry towels (+15.46%), supported by strong export demand during the winter season. However, textile production fell 1.53% MoM due to reduced output in terry towels (-7.38%), woollen and carpet yarn (-3.2%), woollen and worsted cloth (-14.89%), and woollen blankets (-20.49%).
Textile exports for the first half of FY25 (1HFY25) rose approximately 10% to $9.09 billion, compared to $8.29 billion in the same period last year.
Automobile sector
Automobile production fell 7% MoM in November 2024, with declines in jeeps and cars (-6%) and light commercial vehicles (LCVs) (-5%). However, on a YoY basis, the sector saw significant growth, with LCVs, jeeps, and cars increasing by 2.5 times, 1.2 times, and 76%, respectively. Growth was attributed to lower manufacturing costs, stable tariffs, reduced taxes, eased CKD (completely knocked down) import restrictions, and recovering consumer demand.
During 5MFY25, passenger car and LCV production rose 48% and 2x YoY, respectively, supported by interest rate cuts and stable prices that boosted purchasing power.
Food, cement sectors
The food sector experienced a 15% MoM production increase in November 2024, driven by bakery products, vegetable ghee, and wheat and rice milling.
Cement production, however, fell 5% MoM to approximately 3.4 million tonnes, compared to 3.5 million tonnes in October 2024. For 5MFY25, cement output declined by 1% YoY due to reduced construction activity, higher federal excise duties (FED), and increased taxes. Production is expected to recover in 2HFY25, supported by seasonal demand from March to June.
Petroleum sector
Petroleum output rose 17% MoM in November 2024, led by higher production of naphtha (+69%), lubricating oil (+34%), and high-speed diesel (HSD) (+21%). Despite this increase, petroleum production fell 2.4% YoY during 5MFY25 due to lower demand.
Looking forward, petroleum production is expected to rise, supported by a 10% MoM increase in sales volumes, particularly in motor spirit (MS) and HSD. However, furnace oil (FO) sales fell 17% YoY, reflecting reduced demand from power generation companies. Taurus Securities anticipates a recovery in LSMI driven by rising aggregate demand, lower inflation, and expected interest rate cuts to 12% by FY25's end. However, growth may remain subdued due to high taxation. Increased private-sector credit could provide additional support.
AHL reports indicate that LSMI production may gradually recover due to improving macroeconomic indicators.