LSM riding on consumerism

Large-scale manufacturing gathered pace over the course of the outgoing fiscal and data released by the Federal Bureau of Statistics, earlier this week cite year-on-year LSM growth at 1.14 percent. This tally surpasses governments own estimates of 0.98 percent growth, (according to the Economic Survey of Pakistan) but a closer scrutiny the data provides little reason for bringing out the confetti and party hats. BOS index which aggregates data gathered from the provincial bureaus of statistics showed negative growth of 12.7 percent compared to FY10. Within this head, literally all production that is in turn utilised for further manufacturing, declined. Cement sales were down 8.3 percent in FY11 compared to the previous year. During this period, production of solid and liquid paints and varnishes was down 16 percent and 25.5 percent, respectively. Similarly plywood production dropped 6.7 percent, year-on-year. These trends are hardly surprising when viewed against the severely slashed PSDP as well as retarding real estate development by the private sector. Similarly, the production of electric tubes, fans, meters and transformers fell by 63.5, 10.2, 13.3 and 53.6 percent respectively. The acute shortage of electricity in the country appears to be retarding the production of these products on one hand; and diluting demand for the same on the other. So what facets of the countrys industry perched up overall growth in LSM? It appears that consumer spending ruled the year as production of a host of consumer items from cooking oil (6.17 percent) to television sets (28.5 percent) shot up considerably. Viewed against May 2011, LSM growth declined by 1.92 percent in the last month of the fiscal. As displayed in the graph, this trend is largely in line with historical trends. In this context it may be reasonably assumed that growth may not commence until the end of the current month (August). At present there is a dearth of policies that may provide impetus for growth to private enterprise, while the government is itself too cash-strapped to take on any major developmental projects that may boost LSM growth. If the government were to launch any populist measures to shore up support ahead of the elections, the teetering economic balance may be jeopardised; an eventuality the country can ill-afford at this juncture.