LSM surges 9% YoY on low base
LSM
Pakistan's large-scale manufacturing (LSM) sector showed a recovery, increasing by 9% year-on-year and 2.6% month-on-month in July 2025, primarily due to a low base, along with improved domestic demand and sector-specific gains that boosted industrial output.
Analysts attribute the rebound to strong performances in automobiles, garments, cement, and petroleum products, alongside stable — though elevated — energy prices and easing interest rates.
The LSM Index climbed to 115.68 points in July 2025, compared to 106.14 points in July 2024 and 112.75 points in June 2025, according to provisional data released by the Pakistan Bureau of Statistics (PBS).
The LSM recorded 8.99% YoY growth and 2.6% MoM growth.
The performance was largely driven by robust growth in key industries including automobiles (+57.8%), garments (+24.8%), cement (+18.8%), and petroleum products (+13.2%). Furniture production surged by 86.8%, while other transport equipment jumped by 45.8%. Meanwhile, food and paper & board contributed positively, rising by 6.6% and 15.0%, respectively.
On the other hand, some sectors showed contraction. Beverages (-6.2%), chemicals (-2.6%), iron and steel (-3.7%), and fertilisers (-1.6%) weighed on overall growth. Machinery and equipment also reported a sharp decline of 22.8%.
According to PBS, the major contributors to overall LSM growth in July were wearing apparel (3.80 percentage points), automobiles (1.33 ppts), petroleum products (1.01 ppts), non-metallic mineral products (0.96 ppts), and furniture (0.91 ppts). In contrast, beverages and chemicals dragged the index down by 0.39 ppts and 0.24 ppts, respectively.
Sana Tawfiq, analyst at AHL, while speaking to The Express Tribune, said the recent rise in the Large-Scale Manufacturing index is partly due to a low base effect, as overall productivity had declined significantly last year. She noted that the policy rate, which stood at 19.5% in July 2024, has now come down to 11%.
However, the business community has criticised the State Bank of Pakistan's (SBP) recent decision to keep the rate unchanged at 11% despite inflation easing to around 3%.
According to Tawfiq, Pakistan has recently emerged from an economic slump, and with rising domestic demand, much of the LSM growth is being driven by internal consumption. While energy prices remain high, their stability has kept the cost of doing business in check. Looking ahead, Tawfiq emphasised that productivity growth could face short-term disruptions due to floods, but lower interest rates are expected to support LSM expansion and contribute to overall economic growth. She added that if the current momentum continues, the LSM sector, which carries around 8% weight in GDP, could significantly boost growth.
Meanwhile, the SBP in its latest monetary policy projected GDP growth in the range of 3.25% to 4.25%, with risks tilted towards the lower end.
Industrial activity posted strong growth, driven by notable increases in production across garments, refineries, cement, and automobiles, said AKD Securities Director of Research Mohammed Awais Ashraf.
Garments output rose on the back of higher US orders ahead of tariff implementation. Cement production benefitted from stronger exports and a favourable low base, as last year's output was impacted by traders' strikes following the imposition of withholding tax.
Meanwhile, automobile production recorded significant growth, supported by improved economic activity, lower interest rates, and the absence of plant shutdowns that constrained production during the same period last year.
Gold prices in Pakistan surged to a historic peak on Tuesday, mirroring gains in the global market. According to the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA), the price of gold per tola climbed by Rs4,700 to a record Rs391,000, while 10-gram gold rose by Rs4,030 to Rs335,219.
A day earlier, the yellow metal had remained steady at Rs386,300 per tola. Internationally, gold also advanced, with prices hitting $3,692 per ounce (including a $20 premium), reflecting a $49 increase.
Silver followed suit, with its price per tola rising by Rs53 to Rs4,496. The global rally was driven by a weaker US dollar ahead of the Federal Reserve's policy meeting this week, where an interest rate cut is widely anticipated.
The Pakistani rupee extended its upward trend against the US dollar on Tuesday, posting a slight gain in the inter-bank market.
By the day's close, the rupee settled at 281.51 per dollar, inching up by Rs0.01 and marking its 28th consecutive session of appreciation. A day earlier, it had closed at 281.52.
On the global front, the US dollar hovered near a two-and-a-half-month low against the euro and approached a 10-month low versus the Australian dollar, as investors reinforced expectations of a Federal Reserve rate cut this week followed by further easing.