Large Scale Manufacturing Sinks to Negative Double Digits

Large Scale Manufacturing (LSM) growth was recorded in the negative double digits for the outgoing fiscal year. This is such a rare scenario that it has only happened once in the last 15 years, that too during the peak COVID-19 period in 2020.

LSM growth decreased by an additional 15% year over year in June 2023, marking the twelfth consecutive month of negative year-over-year growth and the sixth consecutive month of double-digit negative growth. Another milestone, excluding Covid, is four quarters in a row with negative LSM growth. Given that Pakistan’s much-discussed 0.29 percent FY23 GDP growth was based on a negative 7.98% LSM growth, the updated data are expected to push FY23 GDP growth into negative territory as well.

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Almost everything else is red, including fertilizer, chemicals, and everything from gasoline to automobiles. Businesses are finding it difficult to keep up with the rising cost of conducting business as a result of large increases in energy and credit expenses from a year ago. Record-high household inflation and the resulting erosion in discretionary earnings have ensured demand destruction.

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The rapid pace at which energy and transport expenses have gone up warrants a second round of inflation, putting consumers’ purchasing power to the test once again. The LSM growth may also face difficulties in FY24, as company executives particularly in the textile industry have dubbed the current energy tariffs a death blow to the sector. The LSM has nothing positive to report, as the bottom may have already been hit.

Source: Business Recorder

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