Industrial output shrinks for 13th straight month in July

ISLAMABAD: Industrial output contracted by 1.09 percent in July from a year earlier, official data showed on Monday, as the country’s large-scale manufacturing sector continued to suffer from high costs and import restrictions.

July was the 13th consecutive month that the sector output shrank, reflecting the impact of the economic slowdown that has disrupted industrial activity and hit exports. The Pakistan Bureau of Statistics (PBS) said that out of 25 sectors, only 10 witnessed positive growth and the rest were in negative territory in July, the first month of the fiscal year 2023-24

The major sectors that recorded declines included textiles, automobiles, petroleum products, iron and steel, electric equipment, and leather products, while pharmaceuticals, chemicals, garments, food, and tobacco showed increases.

Interestingly, during fiscal year 2022-23, large-scale manufacturing (LSM) sector contracted by 10.26 percent, with almost all major industries reporting substantial declines.

Economists attributed this decline to costly bank financing, rupee devaluation, cuts in imports, expensive energy, and political unrest. In FY22, a robust growth rate of 11.7 percent was recorded, as the sector was vastly supported with less expensive funds and favourable policies to simulate production and then GDP growth.

Throughout FY23, the LSM sector experienced broad-based contraction on a monthly basis. The downward trend began in May 2022 and persisted into the start of FY23 in July, with a contraction of 1.86 percent.

In January 2023, output declined by 7.8 percent, followed by a decrease of 11.59 percent in February. March saw a steep decline of 25 percent, while April recorded a negative growth of 21.07 percent.

In May, this contraction stood at 14.4 percent and in June 2023, it was at negative 14.96 percent. Out of 25 sectors, the PBS data showed that only 10 sectors witnessed positive growth, while the rest were in red.

During the month, a few major sectors reported increased output compared to the same month of the previous year. Food output increased by 10 percent, tobacco by 54 percent, garments 30.84 percent, chemicals 5.9 percent (including a 16.98 percent decline in chemical products and a 26 percent increase in fertiliser production), pharmaceuticals 54.2 percent, rubber products 10.24 percent, non-metallic minerals 35.18 percent, machinery and equipment 3.91 percent, football 13.25 percent and cement output increased 30.84 percent.

However, textiles experienced a significant decline of 22 percent, beverages 6.7 percent, leather 1.98 percent, wood products 4.46 percent, paper and board 15.4 percent, coke and and petroleum products 2.26 percent, iron and steel 2.66 percent, fabricated metal 4.6 percent; computer, electronics, and optical products 32.1 percent, electrical equipment 22.4 percent, automobile 66.1 percent, while other transport equipment reduced by 19 percent.

Besides, cotton yarn production declined by 29.9 percent, cotton cloth by 17.5 percent, and furniture output contracted by 57.8 percent over the same month of last year.