LSM shrinks 6.34pc on apparel slowdown

The large-scale manufacturing (LSM) sector contracted sharply in December last, underlining mounting pressure on the country's industrial base amid weak exports and rising global uncertainties.

Output in the sector fell 6.34 per cent year on year in December of the current fiscal year, according to data released by the Bangladesh Bureau of Statistics (BBS).

The segment accounts for roughly 11 per cent of gross domestic product (GDP), signifying a broader implication for overall economic growth.

People familiar with the development and some industry insiders attributed the decline primarily to a slowdown in the clothing industry, which carries the heaviest weight on the manufacturing index at about 61 per cent.

A fall in this segment tends to disproportionately drag down the overall index.

The textile sector - the second-largest component with a weight of more than 11 per cent - also declined by over 1.0 per cent during the period, compounding the contraction.

The weak industrial performance coincided with a drop in exports.

Bangladesh's outbound shipments fell 14.25 per cent year-on-year to $3.96b in December 2025, reflecting subdued global demand, elevated production costs, and heightened geopolitical tensions.

Of the 23 large industrial subsectors prepared by the BBS, seven recorded negative growth in December.

Some segments, however, posted gains.

Food manufacturing output rose by around 12 per cent, while sectors such as paper and pharmaceuticals expanded by about 10 per cent each.

But their relatively small weights on the index - with food accounting for only around 4.0 per cent - limited their impact on the overall index.

Business leaders say declining purchase orders for clothing have been a key for the overall contraction.

"We have been facing weak order flows for quite some time," said Mr Anwar Ul Alam Chowdhury Parvez, a former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and managing director of Evince Group.

He added that rising global shipping costs were adding further strain, as international buyers pushed suppliers to absorb higher logistics expenses by lowering manufacturing prices.

Economists warn that external risks remain elevated, particularly amid the ongoing conflict involving Iran and Israel, which has disrupted trade routes and increased freight and input costs globally.

Dr Zahid Hussain, an independent economist, says the deteriorating global outlook is weighing on Bangladesh's external trade.

Higher freight charges and input costs are raising manufacturing expenses and eroding competitiveness, he says.

He further adds that large-scale manufacturing serves as a key proxy for overall economic activity, meaning the contraction could translate into slower GDP growth in the 2026 fiscal year if the trend persists.

jasimharoon@yahoo.com