By Farooq Awan

Pakistan's manufacturing sector maintained strong recovery momentum during FY2025-26, with Large-Scale Manufacturing (LSM) expanding by 6.4% during July-April, driven by robust growth in automobiles, food processing, apparel and petroleum products.

According to the Finance Division's Monthly Economic Update & Outlook (June 2026), the manufacturing sector rebounded sharply from a 1.5% contraction recorded during the corresponding period of the previous fiscal year. The improvement reflects strengthening industrial activity amid improving macroeconomic conditions and rising domestic demand.

The report states that the automobile industry emerged as the largest contributor to LSM growth, adding 1.61 percentage points to overall industrial expansion. The food sector contributed 1.60 percentage points, followed by wearing apparel at 1.19 percentage points and coke and petroleum products at 0.74 percentage points, highlighting broad-based recovery across key manufacturing industries.

According to the report, 16 out of 22 major manufacturing sectors registered positive growth during July-April FY2025-26. These included textiles, wearing apparel, non-metallic mineral products, food, beverages, coke and petroleum products, electrical equipment, automobiles and tobacco, indicating that the recovery extended well beyond a few isolated industries.

Industrial production also remained strong on a monthly basis. During April 2026, LSM grew by 6.1% year-on-year, although output declined 8.3% month-on-month, mainly because of lower production in the chemicals, pharmaceuticals and iron and steel industries. Despite the monthly slowdown, the overall trend remained positive.

The report highlights particularly strong performance by the automobile sector during July-May FY2025-26. Production of trucks and buses surged by 69.6%, while cars recorded a 44.7% increase. Production of two- and three-wheelers rose by 30.4%, whereas jeeps and pick-ups increased by 31.7%, reflecting stronger consumer demand and improved supply conditions across the industry.

Another encouraging development was the recovery of tractor manufacturing. According to the Finance Division, tractor production, which had been declining since the beginning of FY2024-25, returned to positive territory with 0.9% growth during July-May FY2025-26. The turnaround was driven by a sharp 77.4% increase in production during May 2026, signalling renewed demand from the agriculture sector.

The construction industry also showed signs of sustained activity. Total cement dispatches increased by 6.4% to 46.3 million tonnes during July-May FY2025-26. Domestic dispatches rose by 8.3% to 38 million tonnes, reflecting stronger local construction demand. Cement exports, however, declined by 1.2%, with export volumes standing at 8.2 million tonnes during the period.

According to the Finance Division, continued expansion in manufacturing is being supported by improving macroeconomic stability, stronger business confidence and policy measures aimed at boosting industrial production. The recovery in automobiles, construction materials and consumer industries is expected to further strengthen industrial output during FY2026-27.

The report concludes that sustained growth in the manufacturing sector will remain critical for supporting economic expansion, creating employment opportunities and strengthening Pakistan's export capacity. With industrial activity broadening across multiple sectors, manufacturing is expected to continue playing a central role in the country's economic recovery.

Credit: INP-WealthPk