Pakistan’s Large-Scale Manufacturing Rebounds 4.08% in Q1 FY26

Pakistan’s large-scale manufacturing (LSM) sector has begun to show early signs of revival, posting a 4.08% growth rate in the first quarter (July–September) of the 2025–26 fiscal year, according to the latest official data. This marks a noticeable improvement compared to the same quarter last year, reflecting a gradual rebound in industrial activity after months of volatility driven by inflation, weak demand, and high production costs.

During September 2025 alone, year-on-year LSM output grew by 2.69%, following a 2.05% annual rise in August. However, the monthly trend showed some fluctuation, as output in August declined by 2.75% compared to July, indicating that while year-over-year performance is improving, short-term growth remains uneven.

The Quarterly Quantum Index of Large-Scale Manufacturing (QIM) revealed that a few key industries played a central role in driving overall growth. Automobiles contributed the highest share at 1.84%, supported by better sales and production of commercial vehicles and select passenger models. The food sector added 0.91%, helped by increased processing activity and improved agricultural supply. Cement output also strengthened, contributing 0.83%, owing to rising domestic construction activity and steady export demand. The garments and non-metallic mineral sectors added 0.42% and 0.81%, respectively, reflecting increased orders from export markets and consistent demand in the construction sector.

Despite the positive overall trend, several major industries continued to struggle. Petroleum products, chemicals, pharmaceuticals, iron and steel, machinery and equipment, and furniture all posted declines due to weak domestic demand, higher input costs, and slower export orders. These contractions highlight that recovery is uneven and concentrated in select industries, rather than broad-based across the manufacturing landscape.

Detailed production trends show that food processing, tobacco, wearing apparel, non-metallic mineral products, electrical equipment, automobiles, and transport equipment performed strongly during the three-month period. On the other hand, declines were seen in beverages, chemical products, iron and steel, machinery and equipment, and furniture manufacturing.

Economists note that while the 4.08% quarterly growth is encouraging and suggests early stabilization of the industrial sector, sustained improvement will depend on easing energy prices, improving business confidence, and maintaining policy continuity. The recovery trajectory remains sensitive to external demand, exchange rate pressures, and domestic macroeconomic conditions.

Overall, the Q1 performance indicates that Pakistan’s LSM sector is moving toward gradual recovery, but achieving strong, broad-based industrial growth will require continued support and stability in both economic and policy environments.