Manufacturing Output Shows Modest Improvement in First Quarter

Nepal’s manufacturing sector recorded a modest improvement in the first quarter of the current fiscal year, according to data released by the National Statistics Office (NSO) on Thursday.

The Manufacturing Production Index increased by 2.2 percent in the first quarter of fiscal year 2025/26 compared to the same period of the previous fiscal year. The index rose to 125.2 from 123 in the corresponding quarter last year, which the office described as a moderate year-on-year growth.

According to the NSO, production increased notably in industries such as edible oil, chemicals and some consumer goods. However, output growth remained weak in construction-related industries, textiles and some other sectors.

NSO spokesperson Dhundiraj Lamichhane said the data indicate that industrial production is not in a negative trend, although the growth rate remains subdued. “The figures show that the situation is gradually improving,” he said.

Concerns had been raised that the investment climate might have been adversely affected following the Gen Z movement. However, Lamichhane said industries continued to operate normally during the review period, preventing a negative impact on overall industrial output.

Industrial Producer Price Index

The Industrial Producer Price Index increased by 3 percent year-on-year in the first quarter of FY 2025/26. The index stood at 164.26 during the review period, up from 159.41 in the same quarter of the previous fiscal year. On a quarter-on-quarter basis, the index rose marginally by 0.5 percent.

“The index is based on prices recorded at the factory gate,” Lamichhane said, adding that the data point to a mild but stable short-term increase in producer prices.

The NSO said the modest quarterly rise suggests limited pricing pressure on producers, with price adjustments occurring gradually. On an annual basis, the increase reflects changes in raw material prices, energy and labour costs, as well as higher prices of imported intermediate goods, leading to accumulated cost pressures.

Producer price increases were more concentrated in high-weight or consumption-oriented industries, including cement, edible oil, tobacco products, soap and detergents, certain food items, chemicals and beverages. In contrast, producer prices in construction- and investment-related industries such as iron products, plastic pipe fittings and bricks as well as grains and rice remained weak or declined.

“This suggests that the anticipated recovery in construction activity has yet to materialise, while competitive pressures have limited price hike,” the NSO said in a statement.

Construction Cost Index

The construction cost index increased by 1.4 percent year-on-year in the first quarter of FY 2025/26. However, compared to the previous quarter, the index declined by 1.39 percent.

The NSO attributed the quarterly decline mainly to falling prices of construction materials such as cement, iron rods, sand, timber and aggregates. Despite the short-term easing, the office cautioned that long-term pressure on construction material prices and labour wages is likely to persist.

Agricultural Producer Price Index

Agricultural producer prices rose by 2.5 percent year-on-year in the first quarter of FY 2025/26, according to the NSO. Lamichhane said the index is based on prices received by farmers at the farm gate.

The increase was driven largely by higher producer prices of cereal crops, which account for nearly 58 percent of the index. Rising prices of maize, paddy and millet pushed the overall index higher. Producer prices of livestock products such as milk, eggs and fish also increased during the review period.

Although the rise remains modest, the NSO said it indicates a slight improvement in farmers’ income while also signalling the potential for some pressure on food inflation in the coming months.