Pakistan's industrial sector showed a mixed performance in the first 11 months of fiscal year 2025-26, with the Large-Scale Manufacturing (LSM) index rising 5.77% year-on-year, even as May recorded a 0.98% decline. The data, released by the Pakistan Bureau of Statistics, highlights a fragile recovery driven primarily by automobiles, food products, and garments, while pharmaceuticals, chemicals, and iron and steel continued to drag down overall output. Main Developments The Quantum Index of Manufacturing (QIM) stood at 121.65 during July-May FY26, up from 115.02 in the same period last year. On a month-on-month basis, LSM production grew 1.21% in May compared to April, suggesting some resilience despite the annual dip. Automobiles were the largest contributor to growth, adding 1.53 percentage points after production surged 58.82% year-on-year. Jeep and car output rose 60.60%, trucks jumped 76.88%, and buses increased 23.66%, though light commercial vehicles dropped 11.27%. Read also: Why England's World Cup Heartbreak Keeps Repeating Itself Food products contributed 1.36 percentage points, with overall output up 7.75%. Within the food group, sugar, bakery, and chocolates saw a 31.54% surge, while wheat and rice milling grew modestly. However, cooking oil, vegetable ghee, and tea blended production declined. Garments added 1.20 percentage points to the index, with exports rising 7.31%. Petroleum products contributed 0.78 points, with petrol, high-speed diesel, and LPG all posting gains, while furnace oil and kerosene output fell. Background The LSM index, compiled by the Pakistan Bureau of Statistics, tracks production across major industrial sectors and is a key barometer of economic health. The 11-month performance marks an improvement after years of sluggish growth, though the May contraction signals ongoing volatility. Several heavyweight industries continued to underperform. Textile production—the largest segment by index weightage—remained virtually flat at -0.09%, reflecting weak export demand. Cotton yarn and cloth grew marginally, but lower export unit values due to subdued global demand weighed on the sector. Pharmaceutical production contracted 8.07%, chemicals fell 2.64%, iron and steel dropped 7.49%, and fertiliser output declined 2.25%. Cement, electrical equipment, furniture, beverages, tobacco, and other transport equipment posted positive contributions, partially offsetting these losses. Why It Matters The LSM data provides a critical snapshot of Pakistan's industrial momentum, which directly impacts employment, tax revenues, and foreign exchange earnings. The strong performance of automobiles and food products suggests domestic demand is picking up, while garment exports indicate resilience in a key foreign exchange earner. However, the contraction in May and the ongoing weakness in textiles, pharmaceuticals, and steel highlight structural challenges. The textile sector's stagnation is particularly concerning given its large weight in the index and its role in exports. The decline in iron and steel also points to headwinds in construction and infrastructure. What's Next The full-year LSM data for FY26, due next month, will reveal whether the 11-month growth trend holds or if the May slump deepens. Analysts will watch for signs of sustained recovery in automobiles and food processing, and for any turnaround in textiles and pharmaceuticals. Policy measures to support industrial output—such as energy subsidies, export incentives, or import tariff adjustments—could influence the trajectory. The PBS's next quarterly report will also provide further breakdowns by sector and region.