Pakistan’s Large-Scale Manufacturing (LSM) sector demonstrated notable resilience in August 2024, showing a strong 4.7% growth on a month-on-month (MoM) basis. This surge reflects a broad revival in economic activities as LSM continues to rebound despite seasonal challenges and other economic pressures. The recent growth signals an optimistic outlook for the sector, though analysts note that the industry will need sustained positive momentum to fully recover and return to pre-pandemic levels.
In the first two months of FY2025 (July-August), however, the sector observed a slight year-on-year dip of 0.2%, contrasting positively against a 2.5% contraction recorded during the same period last year. The recovery is primarily driven by key industries showing positive growth, signaling that foundational segments of Pakistan’s manufacturing sector are recovering steadily. Leading sectors that contributed to this improvement included textiles, food, beverages, wearing apparel, coke and petroleum products, chemicals, automobiles, and paper and board—each integral to Pakistan’s industrial backbone.
Automotive Industry Drives LSM Growth as Production and Sales Soar
Among the industries fueling the LSM sector’s recovery, the automotive industry stands out for its substantial contribution to growth. During the first quarter of FY2025 (July-September), vehicle production and sales witnessed remarkable increases of 18.1% and 17.0%, respectively, as consumer demand for new vehicles remained high. Several factors, including supportive policies for local manufacturers, competitive pricing, and steady economic improvements, have bolstered consumer confidence, leading to increased vehicle purchases.
Breaking down the growth within the automotive segment, car production saw a strong rise of 29.9%. Trucks and buses showed even more remarkable growth, with a surge of 95.5%, reflecting rising demand for commercial vehicles amid expanding infrastructure projects and transport needs. Jeeps and pick-ups, catering to both urban and rural markets, also experienced a 34.1% increase, underscoring demand across multiple consumer segments. This sector’s upward trajectory not only benefits local manufacturers but also strengthens Pakistan’s auto sector supply chains, from parts suppliers to after-sales services.
Cement Sector Boosted by Rising Demand in Domestic and Export Markets
The cement industry, a vital component of Pakistan’s manufacturing landscape, also contributed positively to LSM growth in FY2025, supported by both domestic demand and export growth. Total cement dispatches during July-September 2024 amounted to 10.3 million tonnes, with domestic dispatches accounting for 8.1 million tonnes as construction activities picked up across the country. Cement exports also increased by a notable 22.2%, reaching 2.1 million tonnes, as the industry benefited from strong demand in regional markets.
In September 2024 alone, total cement dispatches stood at 3.5 million tonnes, a slight decline from the 3.7 million tonnes recorded in the same month last year. This dip in local cement dispatches, amounting to 2.6 million tonnes, was offset by a substantial rise in export dispatches. Export volumes surged by an impressive 71.5% year-on-year, reaching nearly 979,000 tonnes, driven by heightened demand in international markets. The cement industry’s strong performance not only demonstrates resilience within Pakistan’s LSM sector but also underscores the potential of Pakistani exports to capture greater market share in the region.
Positive Growth in Key Sectors Underpins LSM Resilience Amid Economic Reforms
The LSM sector’s resilience is attributed to government-backed economic reforms, strategic industrial policies, and a gradual return to normalcy following periods of economic strain. These reforms have helped stabilize key sectors, encouraging local production and supporting Pakistan’s import substitution goals. Improved demand conditions and renewed business confidence have also played a role in bolstering manufacturing output.
Economic analysts are cautiously optimistic about the sector’s future, noting that sustained growth across industries like textiles, chemicals, petroleum, and food processing will be crucial to a long-term recovery. With continued demand for consumer goods and infrastructure materials, combined with a stable business environment, Pakistan’s LSM sector is well-positioned to further strengthen in the coming months.
The steady expansion across diverse sectors within LSM indicates a broader economic recovery in Pakistan, marking a significant milestone in the country’s post-pandemic growth trajectory. This recovery is anticipated to positively impact job creation, boost exports, and foster economic resilience, which is essential for sustained progress. Going forward, the government and industry stakeholders are hopeful that the current momentum will carry forward into FY2025, strengthening the manufacturing sector’s contribution to Pakistan’s economic revival.
Source: GoP Finance Division