Home »BR Research » Industry » LSM 6MFY17: Sluggish growth


The State Bank of Pakistan (SBP) posted the Large Scale Manufacturing (LSM) Index numbers for 6MFY17 which saw a growth of 3.9 percent compared to 3.94 in the same period last year. Taking a closer figure at the various subsectors, the textile sector numbers are yet to show the impact of the recent textile package awarded by the government with the sector recording marginal growth.

The food, beverages and tobacco sector saw decent growth of 7 percent on the back of increased production of sugar and soft drinks. The FMCG sector has been witnessing rapid growth due to rising income levels and population growth so increased production is warranted. However, cigarette growth plunged further into the negative quadrant due to increased excise duty as well as continued illicit trade of cigarettes and lack of documentation of smaller players.

The coke and petroleum product sector saw a decrease in growth with petroleum production manufacturing going from positive growth last year into the red zone for 6MFY17. Pharmaceutical witnessed only marginal change in growth and maintained over 7 percent growth similar to the previous period.

Moving onwards, chemical sector also witnessed negative growth departing from its positive growth trajectory in 6MFY16 with the production of caustic soda falling considerably in the period under review.

Automobiles witnessed a slump in growth as compared to 6MFY17 which is natural due to the Apna Rozgar Scheme of the government coming to an end and bringing down production of cars with it. However, positive growth was recorded in the tractor production which comes in the face of increased construction activity as well as moderate recovery in the agriculture sector.

Moreover, iron and steel products also witnessed decent growth which can be explained by the construction boom across the country and the implementation of a large number of CPEC projects.

However fertilizer growth has dipped possible due to increased inventory this time around as well as the fact that last year saw a big jump because gas supply was resumed to the sector.

A pleasant increase was recorded in electronics manufacturing which is indicative of rising consumerism and a growing middle-class. Refrigerators, fans, deep-freezer production all picked up while storage batteries also went up due to increase in auto manufacturing.

Alarmingly, the leather sector has gone into the red zone with sole leather and leather footwear recording high negative growth in the face of increased competition from China as well as losing their competitive advantage due to various factors such as energy issues and lack of BMR investment.

The growth this year in the LSM index could be termed as more genuine and broad-based as consumer sectors like electronics and FMCG picked up. Although the growth was marginally higher last year it could be taken as hollow, because of fertilizer being a major contributor due to gas resumption.

Copyright Business Recorder, 2017

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