LSM sector growth shrinks by 3.6pc in 1 year

ISLAMABAD     –   Economic activities had remained sluggish in previous fiscal year that could be judged from the figure of big industries growth that shrank by 3.64 percent.

Growth of large-scale manufacturing (LSM) sector shrank by 3.64 percent in previous fiscal year, indicating economic activities had slowdown in the country. According to the latest data released by Pakistan Bureau of Statistics (PBS), the LSM growth had declined by 5.05 percent in the month of June 2019. The contraction came amid dismal performance in the textile, food, beverages and tobacco, coke and petroleum products, pharmaceuticals, chemicals, and automobiles sectors raising fears of large-scale layoffs in the industrial sector.

According to officials, the underwhelming industrial performance was primarily attributed to cuts in Public Sector Development Programme (PSDP) spending. Moreover, it reflected the impact of factors such as monetary policy tightening, exchange rate adjustments, regulatory measures, and uncertainty among certain quarters of the business community regarding the future path of economic policies, which set the tone for the broader economic slowdown.

The lackluster performance in the industrial sector shows the economy is likely to slow down further despite government expectations for the GDP growth to clock in at 3.3 percent in FY2018-19.

Sector-wise, production data of 11 items from Oil Companies Advisory Committee registered a negative growth of 0.53 percent. Similarly, the LSM data, provided by the Ministry of Industries and Production for 36 items, showed negative growth of 2.83 percent during the previous year. Meanwhile, the data provided by the provincial Bureaus of Statistics for 65 items also showed decline of 0.28 percent over the same period.

The negative growth is mainly the outcome of dip in production of automobiles that went down by 11.78 percent, iron and steel products 11.21 percent, followed by coke and petroleum products, which production declined by 8.35 percent. Production of pharmaceuticals had also gone down by 7.68 percent, food, beverages and tobacco by 7.2 percent. The data showed that production of chemicals decreased by 3.6 percent and paper and board production also down by 2.53 percent.

Meanwhile, wood products recorded growth of 20.36 percent, electronics 12.53 percent, engineering products 6.48 percent, fertilizer 7.68 percent and rubber products had also recorded growth of 3.76 percent during the period under review.

On a year-on-year basis, almost all vehicles in the auto sector posted decline in previous fiscal year. Tractor production went down by 30.59 percent, light commercial vehicles 15.84 percent, trucks 34.31 percent, jeeps and cars 6.21 percent and motorcycles 12.93 percent during the period under review. Policy measures like regulatory restrictions prohibiting non-filers from purchase of vehicles, and increase in interest rates dented the demand in the automobile segment to some extent. Furthermore, significant depreciation of PKR increased the cost of production, resulting in escalated prices and dampening the demand further.

In the non-metallic mineral products, cement dipped 2.98 percent in the period under review. The sugar production has dipped by 19.89 percent during the year 2018-19. The decline may have been greater had it not been for cement exports, which partially offset the weakness in domestic demand. The cement sector has been going through a major expansionary phase in recent years, mirroring the increase in economic activity in the country. Sugar production fell 18.34 percent to 5.353 million tons in the July-May 2018/19, while in May 2019, its production decreased by 76.69 percent over same month of last year. Cotton yarn production increased by 0.02 percent to 3.145 million tons in these eleven months, and in May it increased by 0.3 percent.

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