Tag: clothing sector

  • Pakistan’s major industrial production drops by 14.37% in May, marking ninth consecutive decline

    Pakistan’s major industrial production drops by 14.37% in May, marking ninth consecutive decline

    Pakistan’s Large-Scale Manufacturing (LSM) sector suffered a substantial year-on-year decline of 14.37 per cent in May, according to data released by the Pakistan Bureau of Statistics.

    This contraction represents the ninth consecutive month of contraction for the country’s major industries during the outgoing fiscal year FY23. The primary cause behind this downturn can be attributed to a slowdown in the production of export-oriented textile and clothing sectors.

    The consequences of this decline in large industries are evident in the form of a significant number of job losses. The reduction in production capacity has unfortunately resulted in numerous individuals becoming unemployed.

    These statistics shed light on the challenges faced by Pakistan’s manufacturing sector and raise concerns about the overall economic performance of the country in the coming months.

    In May, the growth of LSM experienced a decline compared to the same month last year. The decline in April was 21 per cent, which is lower than the decline of 25 per cent in March, 11.6 per cent in February, and 7.9 per cent in January. In December 2022, there was a slight decrease of 3.51 per cent.

    In November 2022, there was a negative growth of 5.49 per cent, while in October 2022, it declined by 7.7 per cent. In September 2022, there was a decrease of 2.27 per cent compared to the same month last year. In August, there was a slight increase of 0.30 per cent after a decline of 1.67 per cent in July, which marked the first month of the current fiscal year.

    Between July and May, LSM also recorded a negative growth of 9.87 per cent on a year-on-year basis.

    In FY22, the LSM expanded by 11.7 per cent year-on-year. The production estimate for LSM industries was based on the new base year of 2015-16.

    During May, the production of 16 sectors shrank, while only four sectors experienced a marginal increase. The textile sector’s production decreased by 25.97 per cent compared to the previous year. The major negative growth was observed in yarn (29.89 per cent) and cloth (17.49 per cent), while nominal growth was reported in the production of other textile products.

    On the positive side, the production of garments grew by 12.86 per cent in May. Its performance remained positive in the first 10 months, except for February when it experienced a decline.

    In the food group, wheat and rice production decreased by 0.36 per cent and starch and its products by 2.15 per cent. However, there was an increase of 39.99 per cent in the production of blended tea, 24.45 per cent in cooking oil, and 23.80 per cent in vegetable ghee.

    In May, petroleum products witnessed a negative growth of 21.85 per cent, primarily due to a decline in the production of petrol and high-speed diesel. Almost all other petroleum products experienced a slowdown, except for jet fuel, kerosene, jute, and batching oil. The auto sector also suffered a 68.60 per cent slump in May, as the production of almost all types of vehicles declined.

    The production of iron and steel decreased by 5.83 per cent in May, mainly due to a decline of 15.09 per cent in billets/ingots, while non-metallic mineral products saw a marginal growth of 0.53 per cent. However, chemical products experienced a negative growth of 15.44 per cent in May compared to the previous year.

    In May, the production of pharmaceutical products decreased by 38.61 per cent, rubber products by 5.81 per cent, and fertilisers by 13.31 per cent compared to the previous year.

  • Pakistan’s merchandise exports dive for ninth consecutive month, drop by 16.69% in May

    Pakistan’s merchandise exports continue to decline for the ninth consecutive month, plunging by 16.69 per cent year-on-year to $2.18 billion in May, according to data released by the Pakistan Bureau of Statistics.

    The downward trend has persisted throughout the first 11 months (July to May) of the 2022-23 fiscal year, with exports experiencing a dip of 12.14 per cent to $25.36 billion compared to $28.87 billion during the same period the previous year.

    The decline in export proceeds can be attributed to a combination of internal and external factors, raising concerns about the potential closure of industrial units, particularly within the textile and clothing sector.

    In line with this, imports also experienced a significant decrease of 36.76 per cent to $4.27 billion in May compared to $6.76 billion in the corresponding month last year. From July to May, imports fell by 29.22 per cent to $51.15 billion, down from $72.28 billion during the same period last year.

    The government has implemented restrictions on luxury and non-essential goods while promoting imports of raw materials, semi-finished products, pharmaceuticals, food, and energy products. This policy shift has resulted in a substantial decline in the import bill over the past 11 months.

    As a result of these developments, the trade deficit has narrowed by over 40 per cent, reaching $25.79 billion between July and May of the fiscal year 2022-23, compared to $43.40 billion during the corresponding months of the previous year. In May, the trade deficit saw a year-on-year decline of 49.49 per cent to $2.08 billion.

    According to Dawn, the textile and clothing sector, which constitutes over 60 per cent of total exports, has been severely affected, making it challenging for the government to achieve its export target for the current fiscal year. Exporters have pointed out that the federal government lacks a clear strategy and effective prioritization, leading to a decline in textile exports.

    Exporters have also highlighted several root causes contributing to the export decline. These include shortages in working capital and liquidity, delayed refunds of taxes and levies, technology upgradation fund, and duty drawbacks.

    The promised faster refund system has not functioned as intended, resulting in refund processing times of 3-5 months instead of the expected 72 hours. The sector is also grappling with increased financial and energy costs.

    In addition, exporters are facing challenges in procuring raw materials and other inputs, both domestically and through imports. The State Bank of Pakistan’s hurdles in opening letters of credit have further contributed to the decline in exports.

    The negative growth in exports, except for a slight increase in August due to backlog clearance, poses a significant concern as it threatens the balance of the country’s external account.

    The government needs to address these issues promptly and formulate effective policies to revive the export sector and stimulate economic growth.